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[00:00:04]

[CALL TO ORDER]

GOOD MORNING.

UH, MY NAME IS ALISON ALTER AND I CHAIR THE AUDIT AND FINANCE COMMITTEE.

I'LL CONVENE THIS MEETING AT 9:32 AM ON MAY, UH, 10TH IN THE CHAMBERS.

I'M JOINED ON THE DAIS BY COUNCIL MEMBERS FUENTES AND POOL AND, UH, REMOTELY BEHIND, UH, COUNCIL MEMBER KELLY, I BELIEVE COUNCIL MEMBER RYAN AL ALTER WILL BE JOINING US SHORTLY.

UM, WE HAVE NO PUBLIC COMMUNICATION THIS MORNING.

I'M GONNA TAKE THINGS A LITTLE BIT OUT OF ORDER TO ACCOMMODATE, UM, OUR, UM, AUDITORS, UM, SCHEDULE.

SO I'M JUST GONNA GIVE YOU A SENSE OF HOW I'M GONNA TAKE UP THE ORDER.

IT'S A LITTLE BIT, UM, SCRAMBLED THIS MORNING.

UM, SO WE'RE GONNA TAKE UP ITEMS THREE AND FOUR WITH THE EXTERNAL AUDITORS AND THE REVIEW OF THE PENSIONS.

THEN WE'LL TAKE UP THE MINUTES, AND THEN I'M GONNA GO TO THE ITEMS FIVE AND SIX, WHICH ARE THE AUDITORS ITEMS, AND THEN THE JOINT SUSTAINABILITY COMMITTEE, UM, BYLAW CHANGES ON FUTURE ITEMS. UM, SO WE WILL START, UM,

[3. Fiscal Year 2023 Annual Comprehensive Financial Report and Single Audit Report by Deloitte & Touche LLP, the City's external auditor.]

WITH ITEM NUMBER THREE, WHICH IS THE FISCAL YEAR 2023 ANNUAL COMPREHENSIVE FINANCIAL REPORT AND SINGLE AUDIT REPORT BY DELOITTE AND TOUCH THE CITY'S EXTERNAL AUDITOR.

UM, WE WILL FIRST HEAR FROM, UH, MARIA YUKI.

ALL RIGHT.

GOOD MORNING, MAYOR PRO TEM AND COUNCIL MEMBERS.

UH, I'M MARIA, THE CITY CONTROLLER.

I'M HERE WITH DELOITTE AND TOUCH, UH, THE EXTERNAL AUDITOR TO PRESENT THE RESULTS OF THE FISCAL YEAR 2023 ANNUAL COMPREHENSIVE FINANCIAL REPORT OR AFER AUDIT, ALONG WITH THE RESULTS OF THE FISCAL YEAR 2023, UH, SINGLE AUDIT OR GRANT AUDIT.

THANK YOU.

THE ACFA REPORT WAS ISSUED ON MARCH 12TH, 2024.

IT IS AVAILABLE ONLINE@AUSTINTEXAS.GOV, OR ON THE WEBSITE LISTED ON THIS SLIDE.

THE FINANCIAL SERVICES DEPARTMENT ACCOUNTING AND REPORTING DIVISION IS RESPONSIBLE FOR THE PREPARATION OF THE CITY'S AFER, AND OUR TEAM WORKS CLOSELY WITH DELOITTE TO OBTAIN AN INDEPENDENT AUDIT OF THIS REPORT.

THE REQUIREMENTS FOR AN ANNUAL AUDIT ARE OUTLINED ON THIS SLIDE, AND THE CITY IS IN COMPLIANCE WITH ALL OF THESE REQUIREMENTS.

THE SINGLE AUDIT COVERS THE CITY'S COMPLIANCE WITH FEDERAL AND STATE GRANT REQUIREMENTS.

THE SINGLE AUDIT REPORT WAS ISSUED ON APRIL 11TH, 2024, WHICH IS WELL IN ADVANCE OF THE REQUIRED JUNE 30TH DEADLINE.

AND THE REPORT IS ALSO AVAILABLE ONLINE@AUSTINTEXAS.GOV AND THE WEB ADDRESS LISTED ON THIS SLIDE.

THIS SLIDE LIST, THE REQUIREMENTS FOR WHEN AN ENTITY IS REQUIRED TO HAVE A SINGLE AUDIT OF ITS FEDERAL AND STATE AWARDS, BOTH UNDER FEDERAL AND STATE REGULATIONS, WE'RE REQUIRED TO HAVE A SINGLE AUDIT.

IF WE EXPEND MORE THAN $750,000 ANNUALLY IN FEDERAL OR STATE GRANTS.

UM, THE FOCUS ON THE SINGLE AUDIT IS ON, ON GRANT COMPLIANCE, AND THE AUDIT MUST BE COMPLETED WITHIN NINE MONTHS OF FISCAL YEAR END OR, OR JUNE 30TH.

AND BEFORE I HAND IT OFF TO, UH, THE PRESENTATION TO DELOITTE, I'D LIKE TO THANK THOSE LISTED ON THIS SLIDE FOR THEIR CONTRIBUTIONS TO THE EARLY COMPLETION OF THESE KEY FINANCIAL REPORTS.

UM, TRACY AND CAMERON FROM DELOITTE WILL TAKE OVER THE PRESENTATION NOW, AND I'M AVAILABLE FOR ANY QUESTIONS.

SURE.

YOU HAVE THEM.

DO YOU WANNA FLIP? YEAH, I DON'T WANNA TOUCH ANYTHING.

GOOD MORNING, EVERYONE.

MY NAME IS TRACY COOLEY, AND I'M A MANAGING DIRECTOR AT DELOITTE AND RESPONSIBLE FOR THE SERVICES THAT WE PROVIDE TO THE CITY.

UM, IT'S NICE TO SEE EVERYONE AGAIN, AND I HAVE TWO COLLEAGUES WITH ME.

UH, CAMERON DECKER IS THE SENIOR MANAGER ON THE ENGAGEMENT, AND MADELINE MORRIS IS THE AUDIT MANAGER ON THE ENGAGEMENT.

UM, NEXT SLIDE.

AND AS MARIA SAID, OUR SCOPE FOR THIS YEAR'S AUDITS, UH, WERE THE AFER, WHICH IS THE FINANCIAL STATEMENTS, AS WELL AS THE COMPLIANCE AUDITS, BOTH THE FEDERAL AND STATE SINGLE AUDITS AND THE PASSENGER FACILITY CHARGE AUDITS AS WELL.

UH, WE ALSO DO AN AGREED UPON PROCEDURES, UH, ARRANGEMENT FOR THE CITY FOR THE REQUIREMENTS OF THE TEXAS, UH, TCEQ COMMISSION ON ENVIRONMENTAL QUALITY.

UM, ALL OF THAT WAS COMPLETED.

UH, WE ARE, WE'RE SITTING HERE ON THE OTHER SIDE OF THE AUDIT NOW WHERE EVERYTHING HAS BEEN COMPLETED.

UH, NEXT SLIDE.

SO, OUR AUDIT WAS CONDUCTED IN ACCORDANCE WITH, UH, GENERALLY ACCEPTED AUDITING STANDARDS.

AND REALLY, THE, THE PRIME PURPOSE OF THE AUDIT OF THE FINANCIAL STATEMENTS IS TO EXPRESS AN OPINION ON THE FINANCIAL STATEMENTS, UH, THAT ARE PREPARED BY MANAGEMENT.

AND REALLY WHAT WE'RE LOOKING FOR ARE THOSE FINANCIAL STATEMENTS

[00:05:01]

PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN ALL MATERIAL RESPECTS.

OUR, UH, COM, OUR AUDIT OF THE ACT FOR, UH, WE ISSUED AN UNMODIFIED OR A CLEAN OPINION ON THOSE FINANCIAL STATEMENTS.

UM, WE HAD A, A FEW ITEMS, A FEW ADJUSTMENTS, UM, YOU KNOW, ONE, UH, CONTROL ITEM RELATED TO THE PASSENGER FACILITY CHARGE AUDIT, WHICH WE'LL GO THROUGH.

BUT OVERALL, THE OPINION ON THE AFER WAS A CLEAN OPINION.

UH, SO I'LL TURN IT OVER TO CAMERON, AND WE CAN DIVE INTO A LITTLE BIT MORE OF THE DETAILS ABOUT, UH, THE AUDIT AND THE YEAR, UH, FISCAL 23 IN GENERAL.

IF YOU HAVE QUESTIONS, PLEASE STOP US AS WE GO ALONG.

THANKS, TRACY.

IT'S A PLEASURE TO BE WITH EVERYONE THIS MORNING.

UH, I'M GONNA COVER A LITTLE BIT ABOUT OUR FINANCIAL STATEMENT AUDIT FIRST, AND THEN I'LL HAND IT OVER TO MADELINE TO SPEAK A BIT MORE ABOUT OUR SINGLE AUDIT, AND THEN WE'LL PROVIDE AN UPDATE, UM, AT THE END RELATED TO TCEQ AND THE PASSENGER FACILITY CHARGE AUDIT.

SO, THE FIRST THING WE WANTED TO HIGHLIGHT AS PART OF THE FINANCIAL STATEMENT AUDIT WAS THAT, UH, MANAGEMENT HAD A BUSY YEAR.

THERE WERE A NUMBER OF NEW ACCOUNTING STANDARDS THAT WERE REQUIRED TO BE IMPLEMENTED, AS WELL AS A CHANGE RELATED TO REGULATORY ACCOUNTING THAT WE WANTED TO CALL OUT.

AND OBVIOUSLY, WHEN MANAGEMENT HAS NEW ACCOUNTING STANDARDS TO IMPLEMENT, AND CHANGES ARE BEING MADE TO POLICIES THAT IMPACTS OUR AUDIT.

AND WE WERE ABLE TO AUDIT THROUGH EACH OF THESE NEW STANDARDS AND THE CHANGE FOR REGULATORY ACCOUNTING, UM, AS PART OF OUR AUDIT THIS YEAR.

SO, JUST A COUPLE OF HIGHLIGHTS THERE.

UH, THERE WERE THREE NEW ACCOUNTING STANDARDS THAT WERE IMPLEMENTED THIS YEAR, GASB STATEMENTS, NUMBER 91, RELATED TO CONDUIT DEBT, WHICH HAD NO ACTUAL FINANCIAL IMPACT FOR THE CITY.

UH, GASB STATEMENT NUMBER 94 RELATED TO PUBLIC-PRIVATE AND PUBLIC, PUBLIC PARTNERSHIPS THAT HAD, UM, VARIOUS, UH, IMPACTS ON THE GOVERNMENTAL ACTIVITIES AND BUSINESS TYPE ACTIVITIES RELATED SPECIFICALLY TO GROSSING UP RECEIVABLES AND DEFERRED INFLOWS TO BE IN COMPLIANCE WITH THAT NEW ACCOUNTING STANDARD.

FAIRLY MINIMAL IMPACT AS FAR AS OVERALL OPERATIONS OF THE CITY.

AND THEN GASB STATEMENT NUMBER 96 RELATED TO SUBSCRIPTION BASED IT ARRANGEMENTS.

THIS IS A VERY SIMILAR STATEMENT TO WHAT WE TALKED TO YOU ABOUT LAST YEAR AROUND LEASING ARRANGEMENTS.

HOWEVER, THIS ONE WAS RELATED TO IT ARRANGEMENTS, BUT VERY SIMILAR ACCOUNTING.

AND ACTUALLY HAD, UH, AN INCREASE IN RIDE OF USE ASSETS AND RELATED LIABILITIES OF 59.3 MILLION RELATED TO THE GOVERNMENTAL ACTIVITIES, AND 15.8 MILLION RELATED TO THE BUSINESS TYPE ACTIVITIES.

SO MANAGEMENT WAS ABLE TO IMPLEMENT THOSE STANDARDS, UH, 94 AND 96 AS OF THE BEGINNING OF THE FISCAL YEAR.

AND AGAIN, OUR PROCEDURES, UH, COVERED OFF ON THOSE CHANGES MADE TO BE IN COMPLIANCE WITH THOSE STANDARDS.

THE OTHER NEW, UH, FY 23 CHANGE WAS RELATED TO REGULATORY ACCOUNTING FOR AUSTIN WATER.

UH, THIS ACTUALLY WAS AN ELECTION THAT MANAGEMENT MADE AND RESULTED IN THE ELIMINATION OF REGULATORY ASSETS, DEFERRED INFLOWS, AND AN OVERALL INCREASE IN NET POSITION, UH, TO, UH, AS PART OF THAT CHANGE.

WE ALSO HAVE HIGHLIGHTED HERE MANAGEMENT'S SIGNIFICANT ACCOUNTING ESTIMATES THAT THEY MAKE, AND THAT, UH, WE OBVIOUSLY AUDIT THROUGH OUR SPECIFIC AUDIT STEPS AS IT RELATES TO THOSE ESTIMATES IS COVERED IN APPENDIX B.

WE WON'T GO THROUGH THOSE WITH, WITH YOU IN DETAIL THIS MORNING, BUT IF YOU DO HAVE ANY SPECIFIC QUESTIONS ON OUR AUDIT APPROACH, UH, RELATED TO THOSE ESTIMATES, WE'D BE MORE THAN HAPPY TO ANSWER ANY QUESTIONS YOU MAY HAVE.

AS TRACY MENTIONED, UH, OVER THE COURSE OF OUR AUDIT, UM, WE HAD A FEW, UH, UNCORRECTED MISSTATEMENTS.

THOSE WERE ITEMS THAT WE IDENTIFIED AS PART OF OUR AUDIT, UH, OR THAT MANAGEMENT IDENTIFIED IN THE CLOSED PROCESS THAT THEY DEEMED WERE IMMATERIAL IN NATURE.

WE AGREED WITH THAT.

WE HAVE SUMMARIZED WHAT THOSE MISSTATEMENTS ARE FOR YOU.

UH, AS PART OF APPENDIX C, WHICH IS MANAGEMENT'S REPRESENTATION LETTER.

WE ALSO, UH, ALWAYS TRY AND, UH, AS PART OF OUR AUDIT, MAKE SURE THAT WE HAVE ANY CORRECTED MISSTATEMENTS THAT ARE MATERIAL BROUGHT BEFORE YOU.

AND I'M HAPPY TO REPORT THAT THERE WERE NO, UH, MATERIAL CORRECTED MISSTATEMENTS AS PART OF OUR AUDIT, WHICH IS ALWAYS GREAT NEWS.

AND MY CLICKER HAS DIED, .

OKAY, PERFECT.

UM, THE NEXT COUPLE OF SLIDES WALK THROUGH SOME OF OUR OTHER REQUIRED COMMUNICATIONS.

UH, THIS SLIDE IS TALKING A LITTLE BIT ABOUT OUR SPECIFIC PROCEDURES AND, UH, HOW OUR AUDIT TAKES INTO CONSIDERATION REQUIRED SUPPLEMENTARY INFORMATION, AS WELL AS SUPPLEMENTARY INFORMATION.

THESE ARE WHAT I WOULD CALL NON-CORE PARTS OF THE FINANCIAL STATEMENTS, NOT CONSISTING OF THE FACE OF THE FINANCIALS AND THE NOTES, BUT SOME OF THAT MDNA, UH, MANAGEMENT DISCUSSION AND, UH, ANALYSIS, AS WELL AS SOME OF THE PENSION SCHEDULES OR WHAT MAKES UP THE REQUIRED SUPPLEMENTARY INFORMATION.

AND THEN SUPPLEMENTARY INFORMATION BEING THE, UH, FUND SCHEDULES, SUPPLEMENTAL SCHEDULES, THE CFA, ET CETERA.

[00:10:01]

UM, THIS GOES THROUGH OUR VARIOUS AUDIT STEPS AS IT RELATES TO THOSE.

UM, SO I WON'T COVER THAT IN MUCH DETAIL.

UM, A COUPLE OF THINGS TO POINT OUT HERE.

AGAIN, THERE'S OTHER INFORMATION INCLUDED IN THE ANNUAL, UH, REPORT.

WE READ THAT OTHER INFORMATION AS WELL AS THE SUPPLEMENTARY INFORMATION AND RSI AND DIDN'T HAVE ANY ISSUES, UM, AS IT RELATES TO THAT INFORMATION.

HOWEVER, OUR OPINION DOES NOT COVER THOSE SPECIFICALLY, UH, ATTACHED AS APPENDIX C AS I'VE ALREADY MENTIONED, IS MANAGEMENT'S REPRESENTATION LETTER THAT THEY MAKE TO US.

I'LL LEAVE THAT FOR YOU, UH, TO REVIEW, AND OBVIOUSLY IF YOU HAVE ANY QUESTIONS, WE CAN COVER THAT.

UH, THIS IS MY FAVORITE SLIDE.

UM, THIS IS A SLIDE THAT AS, UH, THREE COLUMNS TO TELL YOU THAT IT WAS A VERY, UH, REAL PLEASURE TO WORK WITH YOUR MANAGEMENT TEAM HERE AT THE CITY.

THAT WAS, UH, MARIA AND HER TEAM, AS WELL AS COREY.

AND, UH, WE ALWAYS WORK WITH CO TO SEE WHAT HER AUDIT RESULTS HAVE BEEN AND HOW WE CAN, UH, INCORPORATE THOSE INTO OUR PLANNING SECTION.

AND OBVIOUSLY WITH THE CITY OF THIS SIZE, THERE A NUMBER OF CITY DEPARTMENTS, AVIATION, AE, WATER, ET CETERA, THAT, UH, IT TAKES A LOT OF COORDINATION TO MAKE, NOT ONLY PULLING THE FINANCIAL STATEMENTS TOGETHER, BUT TO ACCOMPLISH OUR AUDIT AND MANAGEMENT, UH, WAS VERY COOPERATIVE THROUGH THAT PROCESS.

AND SO, JUST WANTED TO ECHO MARIA'S STATEMENTS AND TELL THEM THANK YOU.

THIS SLIDE TALKS A LITTLE BIT ABOUT CONTROL RELATED MATTERS.

UH, WE'VE GIVEN YOU DEFINITIONS OF WHAT A, UH, DEFICIENCY, A MATERIAL WEAKNESS AND A SIGNIFICANT DEFICIENCY ARE, UH, IN APPENDIX D.

UM, I'LL LET YOU READ WHAT THOSE ARE, UH, AND WE DON'T HAVE, BUT ONE, UH, ITEM TO DISCUSS THIS YEAR.

UH, AND THAT IS RELATED TO PFCS, WHICH WE'LL GET INTO IN JUST A MOMENT.

BUT, UH, WE DON'T HAVE ANY SIGNIFICANT DEFICIENCIES OR, UH, MATERIAL WEAKNESSES RELATED TO THE FINANCIAL STATEMENT AUDIT FOR THIS YEAR, WHICH IS, AGAIN, UH, REALLY GOOD NEWS.

THIS SLIDE TALKS A LITTLE BIT ABOUT THE, UH, REMEDIATION TO A PRIOR YEAR SIGNIFICANT EFFICIENCY THAT WE HAD AS PART OF OUR AUDIT RELATED TO LEASE ACCOUNTING.

UH, WE PERFORMED PROCEDURES THIS YEAR TO ENSURE THAT THAT WAS PROPERLY REMEDIATED BY MANAGEMENT, AND WE FOUND THAT TO BE THE CASE.

I'LL TURN IT OVER TO MADELINE AT THIS POINT TO TALK A LITTLE BIT MORE ABOUT OUR SINGLE AUDIT.

THANKS, CAMERON.

GOOD MORNING, EVERYONE.

IT'S GREAT TO BE HERE WITH YOU.

UM, SO THIS SLIDE SUMMARIZES OUR SINGLE AUDIT REPORT OR OUR COMPLIANCE AUDIT OVER BOTH FEDERAL AND STATE PROGRAMS. THESE REPORTS WERE ISSUED ON APRIL 11TH, AND THEY WERE BOTH UNMODIFIED OR CLEAN OPINIONS.

IN THIS CASE, WE DID NOT HAVE ANY CURRENT YEAR FINDINGS.

THIS IS THE RESULT OF THE PRIOR YEAR, SIGNIFICANT DEFICIENCY RELATED TO THE IMMUNIZATION OUTREACH PROGRAM.

THIS PROGRAM, LIKE OTHER GRANTS, REQUIRES REPORTING BACK TO THE GRANTOR IN THE PRIOR YEAR.

WE HAD A FINDING THAT'S DETAILED ON THIS SLIDE RELATED TO A REPORTING FINDING.

WE PERFORMED REMEDIATION ACTIVITIES IN THE CURRENT YEAR TO SUPPORT THE CONCLUSION THAT THIS HAS BEEN REMEDIATED.

NEXT, THIS SLIDE DETAILS THE AMOUNT OF FEDERAL DOLLARS EXPENDED BY THE CITY AND THE CURRENT YEAR.

AND THAT WAS A LITTLE OVER 200 MILLION THIS YEAR.

AND THE CHART SHOWS WHICH MAJOR PROGRAMS WE SELECTED FOR TESTING DURING THE CURRENT YEAR AUDIT.

AND IT'S IMPORTANT TO EMPHASIZE HERE THAT OUR AUDIT IS FOCUSED ON THE EXPENDITURES FOR THE PROGRAMS RATHER THAN THE AMOUNT THAT'S AWARDED.

UM, SPECIFICALLY IN TERMS OF THE ARPA PROGRAM, THERE WAS A LOT OF MONEY RECEIVED UPFRONT, AND, BUT OUR AUDIT IS FOCUSED ON SPECIFICALLY WHAT WAS EXPENDED DURING THE CURRENT FISCAL YEAR.

AND THE NEXT, THIS SLIDE DETAILS THE AMOUNT OF STATE, UM, DOLLARS EXPENDED, WHICH WAS A LITTLE BIT LESS THAN THE FEDERAL PROGRAMS. IT WAS 7 MILLION THIS YEAR.

UM, AND THE CHART IS THE AMOUNT OF MAJOR PROGRAMS THAT WERE SELECTED IN THE CURRENT YEAR FOR TESTING.

WITH THAT, I WILL PASS IT BACK TO CAMERON.

AWESOME.

I JUST WANTED TO SPEAK TO THOSE, UH, OTHER COUPLE OF REPORTS THAT TRACY MENTIONED EARLIER.

THE FIRST ONE BEING THE TCEQ AGREED UPON PROCEDURES.

WE PERFORMED THAT AND ISSUED, UH, THAT REPORT ON MARCH THE 25TH AND HAD NO FINDINGS.

WE'VE ALSO COMPLETED OUR PASSENGER FACILITY CHARGES REPORT, AND ISSUED THAT ON APRIL THE 18TH.

WE DID HAVE ONE FINDING AS A RESULT OF, UH, THAT COMPLIANCE AUDIT AND THAT FINDING WAS NON-COMPLIANCE AND A SIGNIFICANT DEFICIENCY IN INTERNAL CONTROLS RELATED TO QUARTERLY REPORTING REQUIREMENTS.

THERE IS A REQUIREMENT THAT, UH, THE AVIATION DEPARTMENT MUST, UH, COMMUNICATE WITH THE, UH, CARRIERS AS TO HOW MUCH IS EXPENDED, UH, EACH QUARTER.

AND, UH, WE WERE

[00:15:01]

SELECTED ONE OF THOSE REPORTS.

AND, UM, AS YOU CAN SEE HERE, THE EXPENDITURES INCLUDED WITHIN THAT REPORT SUBMITTED WERE UNDERSTATED BY ABOUT 4.6 MILLION.

UH, WE WORKED WITH THE AIRPORT TO, UM, WORK THROUGH THAT.

THEY HAVE THEIR, UH, RESPONSIBLE, UH, OFFICIAL RESPONSE HERE, UH, THAT YOU CAN READ THROUGH.

AND THIS HAS ACTUALLY BEEN, UM, IMPLEMENTED.

THEIR CORRECTIVE ACTION HAS BEEN IMPLEMENTED AS OF, UH, OCTOBER.

THIS REPORT WAS CORRECTED, UM, IN NOVEMBER UPON, UH, NOTICING THAT THE, THE EXPENDITURE AMOUNTS WERE, UM, INCORRECT FOR THE ORIGINAL REPORT.

SO, UM, WE WILL OBVIOUSLY ENSURE COMPLIANCE NEXT YEAR FROM A REMEDIATION PROCEDURES, UH, LIKE WE JUST TALKED ABOUT WITH OUR, UH, PRIOR YEAR, SIGNIFICANT DEFICIENCIES AS WELL.

UM, WITH THAT, OUR NEXT SLIDE JUST DETAILS THE APPENDICES THAT WE'VE MADE REFERENCE TO HERE THROUGHOUT OUR PRESENTATION.

UH, WE'LL LEAVE THOSE FOR YOUR REVIEW, UM, BUT WE'D BE HAPPY TO ANSWER ANY QUESTIONS YOU MAY HAVE.

THANK YOU.

UM, WELL, FIRST OF ALL, CONGRATULATIONS, UM, TO OUR FINANCIAL STAFF ON A CLEAN, UH, SET OF REPORTS.

UM, YOU KNOW, WE HAVE A LOT OF, UM, DIFFERENT MOVING PARTS WITHIN OUR SYSTEM, GIVEN ALL OF THE ENTERPRISE FUNDS, ET CETERA.

AND SO, UM, I'M VERY PLEASED, UM, TO SEE THAT.

SO CONGRATULATIONS AND THANK YOU TO THE AUDITORS, UM, FOR PROVIDING THIS INFORMATION.

UM, I DO HAVE TWO QUESTIONS.

ONE, I WANTED TO GET A LITTLE BIT OF CLARITY.

UM, SO WE HAD TWO POTS OF, OF, UM, PANDEMIC SUPPORT FROM THE FEDS.

UM, IS THE ONE LISTED HERE THE FIRST PART OF THAT FUNDING, OR IS THAT A COMBINATION ACROSS ARPA AND THE CARES ACT? ARPA.

OKAY.

YES.

OKAY.

AND THAT'S JUST HOW MUCH WE EXPENDED IN THE LAST CORRECT YEAR.

OKAY.

UM, THAT'S CORRECT.

WHAT WE ARE RESPONSIBLE, AS MADELINE SAID, FOR AUDITING, IS WHAT YOU IN THE CURRENT YEAR, NOT THE TOTAL CASH THAT WAS RECEIVED UPFRONT.

OKAY.

AND WHEN YOU ARE DOING THAT MM-HMM, , UM, IS THAT ALSO LOOKING THAT WE, WE DID IT IN ACCORDANCE WITH THE RULES AND, AND EVERYTHING LIKE THAT? OKAY.

EXACTLY.

YES.

UM, YEAH, SO I JUST WANNA, YOU KNOW, FLAG THAT, YOU KNOW, WE'VE HAD A REALLY STRONG TRACK RECORD THUS FAR, UM, WITH RESPECT TO OUR, UH, PANDEMIC RELIEF FUNDS AND HOW WE'VE EXPENDED THEM.

THERE WAS NOT A CLEAR PATH ON HOW TO DO THAT.

AND SO I JUST WANNA GIVE KUDOS TO OUR STAFF FOR REALLY MAKING SURE THAT WE ARE LINING UP, UM, WITH THE RULES AND REGULATIONS FROM THAT.

UM, NOT ONLY HAVE WE DONE THAT FROM A, YOU KNOW, AUDIT PERSPECTIVE, BUT WE ALSO, I THINK, HAVE GOTTEN OUR MONEY OUT THE DOOR BETTER THAN SOME OTHER CITIES.

UM, YOU KNOW, IN, IN SPENDING IT WHERE WE NEEDED IT, UM, YOU KNOW, WE HAD ALWAYS PLANNED THAT THERE'S SOME LEFT AT THIS POINT IN TIME.

MM-HMM.

.

SO, SO WE DO KNOW THAT.

UM, AND THEN THE OTHER QUESTION THAT I HAD HAD TO DO WITH THE PASTOR FACILITY CHARGE REPORT AND THAT, UM, NON-COMPLIANCE DEFICIENCY THAT YOU HIGHLIGHTED THERE, UM, IT WAS UNCLEAR TO ME WHETHER MANAGEMENT CAUGHT THAT BEFORE YOU FOUND IT OR WHETHER YOU FOUND IT, AND THEN IT WAS CORRECTED.

WE ACTUALLY SELECTED THAT QUARTER AS PART OF OUR TESTING PROCEDURES, AND, UM, NOTICED THAT THAT ACTUALLY WAS CORRECTED WHEN THEY DID THE QUARTERLY REPORT FOR Q4.

SO THEY HAD CORRECTED THAT REPORT AT THAT TIME.

WE HAVE SEEN THAT AND SAW THAT DURING OUR, THE COURSE OF OUR TESTING.

HOWEVER, BECAUSE WE SELECTED THAT ONE, WE DO HAVE TO REPORT IT.

I, I'M NOT SAYING THAT YOU DON'T HAVE TO REPORT IT, I JUST, I JUST WANTED TO ACKNOWLEDGE THAT THAT WAS SOMETHING THAT THEY HAD ALREADY YES, THAT'S CORRECT.

THAT THEY HAD ALREADY CORRECTED BEFORE IT WAS CORRECTED, BEFORE YOU HAD IDENTIFIED AND IDENTIFIED IT, WHICH I THINK IS SIGNIFICANT AS WE ARE, UM, WE ARE EVALUATING, UM, THE REPORTS THAT CAME BACK.

ABSOLUTELY.

GREAT.

THANK YOU, COLLEAGUES.

DO YOU HAVE ANY QUESTIONS? I, UH, COUNCIL MEMBER RYAN AL ALTER HAS JOINED US AS WELL.

COUNCIL MEMBER RYAN AL ALTER, COUNCIL MEMBER.

KELLY, DO YOU HAVE ANY QUESTIONS? I DO NOT.

OKAY, GREAT.

WELL, THANK YOU VERY MUCH AND CONGRATULATIONS.

APPRECIATE IT TO OUR STAFF.

UM, NEXT UP,

[4. Actuarial Audit Reports on the City’s Pension Systems (Austin Firefighters Retirement Fund, Austin Police Retirement System, and City of Austin Employees Retirement System).]

WE WILL, UM, TAKE UP ITEM FOUR, UH, ACTUARIAL AUDIT REPORTS ON THE CITY'S PENSION SYSTEM.

AND BELINDA WEAVER, UM, WILL PRESENT IT WITH THE CONSULTANTS.

GOOD MORNING, UH, CHAIR AND COMMITTEE MEMBERS.

THIS IS BELINDA WEAVER AND, UM, I AM THE CITY TREASURER.

I'M HERE TODAY TO INTRODUCE OUR NEXT PRESENTERS, ADRIAN LIEBERTHAL AND GREG RENER WITH ATHENA

[00:20:01]

ACTUARIAL CONSULTING.

AND THEY ARE HERE TO PROVIDE A BRIEFING TO THE COMMITTEE ON A RECENTLY CONDUCTED ACTUARIAL AUDIT, UM, ON THE CITY'S THREE PENSION SYSTEMS, THOSE PENSION SYSTEMS. I KNOW YOU'RE FAMILIAR WITH THE AUSTIN POLICE RETIREMENT SYSTEM, THE AUSTIN FIREFIGHTERS RETIREMENT FUND, AND THE CITY OF AUSTIN'S EMPLOYEES RETIREMENT SYSTEM.

UM, FOR A LITTLE BIT OF BACKGROUND, THE CITY DID ISSUE AN RFP LAST YEAR FOR SERVICES PERTAINING TO THE AUDITING OF THE ACTUARIAL VALUATIONS REPORTS AND STUDIES FOR THE CITY'S THREE PENSION SYSTEMS BY AN INDEPENDENT ACTUARY.

AND ATHENA ACTUARIAL CONSULTING WAS THE CONTRACT AWARD.

UM, ADDITIONALLY, THESE AUDITS WERE DONE IN COMPLIANCE WITH STATE LAW.

STATUTORY PROVISIONS DO REQUIRE THAT THIS AUDIT BE PERFORMED EVERY FIVE YEARS FOR THOSE PENSION PLANS THAT HAVE ASSETS IN EXCESS OF A HUNDRED MILLION DOLLARS.

ALL OF THE CITY'S PENSION PLANS ARE WELL NORTH OF THAT MINIMUM REQUIREMENT.

SO ALL THREE PENSION PLANS WERE AUDITED.

UM, THE STATUTE DOES ALSO REQUIRE THAT THE FINAL AUDIT REPORTS BE PRESENTED TO THE GOVERNING BODY OF THE GOVERNMENTAL ENTITY, WHICH IS WHY WE'RE HERE TODAY.

THE FINAL AUDIT REPORTS WILL NEXT GO TO THE FULL CITY COUNCIL FOR ACCEPTANCE AT THE MAY 30TH, UH, COUNCIL MEETING.

AND I DID ALSO WANNA MAKE THE COMMITTEE AWARE THAT WE DO HAVE REPRESENTATION HERE FROM ALL THREE OF THE PENSION SYSTEMS. WE HAVE A NEW KUMAR, THE EXECUTIVE DIRECTOR FOR THE AUSTIN FIRE RETIREMENT FUND.

TYLER LINK, THE DEPUTY EXECUTIVE DIRECTOR FOR THE AUSTIN POLICE RETIREMENT SYSTEM, AND CHRIS HANSEN, THE EXECUTIVE DIRECTOR FOR THE EMPLOYEE'S RETIREMENT SYSTEM.

I WILL NOW HAND IT OVER TO ADRIANA, GREG FOR THE PRESENTATION.

ALL RIGHT.

THANK YOU SO MUCH FOR HAVING US HERE TODAY.

I'M ADRIAN LIEBERTHAL, THE CEO AND FOUNDER OF ATHENA ACTUARIAL CONSULTING, A WOMEN OWNED BUSINESS ENTERPRISE THAT SPECIALIZES IN ACTUARIAL VALUATION AND ACTUARIAL AUDITS.

UM, WE ARE HERE TODAY TO WALK THROUGH OUR RESULTS FROM THE ACTUARIAL AUDITS OF THE, THE THREE PENSION SYSTEMS. SO I'M GONNA GO THROUGH, UM, TALK A LITTLE BIT ABOUT OUR TEAM, OUR QUALIFICATIONS TO BE PERFORMING THIS AUDIT.

I'M GONNA TALK ABOUT THE SCOPE OF WHAT THIS ACTUARIAL AUDIT ENTAILS AND HOW IT'S DIFFERENT FROM, YOU KNOW, THE, THE MORE TRADITIONAL AUDITS THAT ARE DONE OF THE CITY.

UM, AND THEN I'M GONNA REVIEW THE RESULTS WITH A SUMMARY OF RECOMMENDATIONS AND OTHER CONSIDERATIONS.

THERE ARE, UM, SOME VERY EXTENSIVE REPORTS THAT WERE ISSUED ON MARCH 15TH, UH, 2024, THAT HAVE A COMPREHENSIVE OUTLINE OF ALL OF OUR RECOMMENDATIONS.

UH, AND IF YOU ARE WANT TO REFER TO THOSE FOR EVEN MORE, UM, BACKGROUND ON ANYTHING THAT I TALK ABOUT TODAY, UM, YOU'RE WELCOME TO.

I'M JUST GOING TO FOCUS ON THE HIGHLIGHTS AND THE MAJOR FINDINGS THAT THAT STUCK OUT OF WHICH THERE, THERE'S NOT VERY MANY, UM, WHICH IS GOOD NEWS.

UM, WHEN I GO INTO THE RESULTS TODAY, AND I'LL LEAVE SOME TIME AT THE END FOR QUESTIONS.

SO THE ATHENA TEAM, UM, WAS COMPRISED OF FOUR ACTUARIES, UM, ALL WITH ASSOCIATE WHO ARE ASSOCIATES OF THE SOCIETY OF ACTUARIES, OR FELLOWS OF THE SOCIETY OF ACTUARIES.

UH, BETWEEN THE FOUR OF US, WE BRING INDUSTRY KNOWLEDGE FAMILIARITY WITH, UH, NOT JUST PUBLIC PENSIONS, BUT SPECIFICALLY THE AUDITS THAT ARE PERFORMED UNDER SECTION 8 0 2, UH, IN TEXAS, AND MOST IMPORTANTLY, THE INDEPENDENT UNBIASED PERSPECTIVE NECESSARY TO COMPLETE AN ACTUARIAL AUDIT OF THIS TYPE.

UM, IT'S, WE FIND THAT IT'S REALLY IMPORTANT TO HAVE A VARIETY OF BACKGROUNDS THAT ARE REVIEWING THESE REPORTS, UM, SPECIFICALLY BECAUSE THERE'S PROFESSIONAL JUDGMENT INVOLVED IN ANY ACTUARIAL EVALUATION.

UM, AND SO THE, THE VIEWS OF OF THIS REPORT ARE OF, ARE THOSE OF THE ATHENA TEAM THAT ARE ON THE SCREEN.

SO THE SCOPE AND GOALS OF AN ACTUARIAL AUDIT, AGAIN, IT, IT'S DIFFERENT FROM THE, THE TRADITIONAL AUDIT THAT'S PERFORMED FOR A MUNICIPAL ENTITY.

UM, AND OUR TEAM WAS HIRED TO COMPLETE THE ACTUARIAL AUDIT IN ACCORDANCE WITH, UM, TEXAS GOVERNMENT CODE SECTION 8 0 2, UM, DEBT 1 0 1 2, AND EACH AUDIT INCLUDES A REVIEW OF VALUATIONS, EXPERIENCE, STUDIES, AND REPORTS OVER THE PERIOD 2018 TO 2022.

UM, AS BELINDA SAID, THIS IS PERFORMED AND REQUIRED TO BE PERFORMED FOR, UH, SYSTEMS WITH AN EXCESS OF A HUNDRED MILLION DOLLARS IN ASSETS, AND, UM, THEREFORE WAS PERFORMED FOR ALL THREE OF THEIR RETIREMENT SYSTEMS. THIS AUDIT, THE, THE GOALS REALLY ARE TO DETERMINE, UH, WHETHER THE REPORTS ARE PRE

[00:25:01]

PREPARED IN COMPLIANCE WITH THE ACTUARIAL STANDARDS OF PRACTICE FOR OUR INDUSTRY, FOR OUR PROFESSION, AND ARE IN ACCORDANCE WITH THE TEXAS STATE PENSION REVIEW BOARD GUIDELINES, UH, WHICH ARE PREPARED TO MAKE SURE THAT THE, UH, VALUATIONS ARE PERFORMED IN AN ACTUARIAL SOUND WAY.

UM, WE ALSO MAKE SURE THAT THE UTILIZATION OF THE METHODS, UH, ALIGNS WITH INDUSTRY LEADING PRACTICES AND PROVIDE ANY RECOMMENDATIONS FOR IMPROVEMENT.

AND LASTLY, IT'S THE ACTUARY'S JOB TO MAKE SURE THAT THE INFORMATION IS PRESENTED IN A TRANSPARENT AND INFORMATIVE MANNER, UM, FOR THE STAKEHOLDERS.

AND SO WE'RE PROVIDING RECOMMENDATIONS AROUND ANYTHING THAT WASN'T CLEAR TO US.

IT WAS AN INDEPENDENT ACTUARY PICKING UP THE REPORT FOR THE FIRST TIME, SPECIFICALLY FOR THIS AUDIT.

UH, AS WE REVIEWED THE EVALUATIONS AND THE EXPERIENCE STUDIES, WE WERE LOOKING AT THE ACTUARIAL COST METHOD, WHICH IS USED TO CALCULATE THE NORMAL COST, THE ACTUARIAL ACCRUED LIABILITY, ALL OF WHICH IMPACT THE, THE CONTRIBUTIONS AND, UM, VARIOUS OTHER, UH, METRICS THAT ARE IMPORTANT TO THE CITY.

UH, THE APPROPRIATENESS OF THE METHODS USED FOR THE ACTUARIAL VALUE OF ASSETS, UM, THE APPROPRIATE, THE APPROPRIATENESS OF ACTUARIAL ASSUMPTIONS, BOTH THE DEMOGRAPHIC ASSUMPTIONS AND ECONOMIC ASSUMPTIONS, WHICH I'LL GO INTO MORE, UH, THE COMPLETENESS OF THE VALUATION REPORT, UH, LIKE I SAID, IN IN ACCORDANCE WITH THOSE ACTUARIAL STANDARDS OF PRACTICE, THE AS OPS AND WHETHER THE VALUATION MEETS THE STATUARY STATUTORY REQUIREMENTS.

UH, AND THERE'S REQUIREMENTS OF PRB, UH, THE TEXAS PEN PENSION REVIEW BOARD, UM, ANYTHING ELSE THAT WE AS ACTUARIES BELIEVE SHOULD BE ADDRESSED IS ALSO INCLUDED IN THE REPORT.

AND EVERYTHING IS PERFORMED IN ACCORDANCE WITH THE GOVERNMENT FINANCIAL OFFICERS ASSOCIATION, THE GFOA WHEN WE PREPARE OUR ACTUARIAL AUDIT REPORT.

SO THIS IS AN ATHENA, AN ATHENA METHOD.

UH, WE LIKE TO FOCUS ON WHAT WE CALL THE MARGIN OF ERROR, AND WE REALLY TRY AND MAKE SURE THAT WE'RE EMPHASIZING WHETHER SOMETHING WAS MORE OF JUST A RECOMMENDATION, SOMETHING THAT IS MORE INFORMATIVE VERSUS SOMETHING THAT'S LIKELY TO CAUSE A MATERIAL IMPACT TO RESULTS.

AS PROFESSIONALS, ACTUARIES HAVE DIFFERING OPINIONS ON DIFFERENT APPROACHES, AND WE WANNA MAKE SURE THAT WE'RE CLEAR WHEN SOMETHING IS OF HIGH IMPACT VERSUS LOW.

UM, THROUGHOUT THIS PRESENTATION, I'M REALLY ONLY GONNA BE TALKING ABOUT ANYTHING THAT WAS MEDIUM OR HIGHER.

AND, UM, IN, IN OUR REPORT, THERE'S, AGAIN, IN AN EXHAUSTIVE LIST OF ANYTHING THAT WAS JUST SMALL CHANGES THAT COULD IMPACT, UM, THAT COULD IMPROVE THE, THE WAY THAT THE REPORT WAS PUT TOGETHER.

UM, BUT IN GENERAL, WE REALLY TRY TO FOCUS YOUR ATTENTION ON THE THINGS THAT ARE LIKELY TO PROVIDE, UH, LIKELY TO REALLY MATERIALLY IMPACT RESULTS.

SO WITH THAT, I'M GOING TO JUMP IN AND REVIEW THE RESULTS.

AND I'M GONNA START WITH, IN GENERAL, WE DID NOT IDENTIFY ANY SIGNIFICANT DEFICIENCIES IN THE REPORTING OR ANY SIGNIFICANT ISSUES WITH THE BASIS FOR WHICH THE ASSUMPTIONS WERE STUDIED OR DETERMINED.

THERE WAS ONLY ONE FINDING OF WHICH WE CLASSIFIED AS HIGH SIGNIFICANCE.

AND THE GOOD NEWS IS THAT THE CITY'S ALREADY AWARE AND WORKING CLOSELY WITH, UM, WITH THE FIRE SYSTEM TO PUT TOGETHER A VOLUNTARY FUNDING SOUNDNESS PLAN.

UH, IT'S ALREADY BEING WORKED ON.

THIS WAS NOT A SURPRISE.

AND, UM, THE FINDING THAT WE HAD WAS CONSISTENT WITH, UH, THE DETERMINATION TO, TO PUT THAT PLAN IN PLACE.

ANYTHING ELSE THAT WE'LL BE GOING THROUGH TODAY? UM, OTHER THAN THAT ONE FINDING OF HIGH SIGNIFICANCE, AGAIN, IS JUST OUR RECOMMENDATIONS, UM, FOR CONTINUED IMPROVEMENT OF THE REPORTS AND THE WAY THAT THEY'RE PREPARED.

UM, BUT I THINK IT'S IMPORTANT TO REMEMBER THAT, UM, VERY GOOD NEWS, UH, SEEMS LIKE A VERY, UM, THAT THE REPORTS WERE PREPARED IN AN INFORMATIVE AND CLEAR WAY, AND WE AGREED WITH, UH, THE METHODS AND APPROACHES THAT WERE USED BY THE ACTUARIES.

SO THE THREE SYSTEMS THAT WE REVIEWED FOR, AGAIN, YEARS 2018 THROUGH 2022, UM, THE, WE JUST WANTED TO, TO LEVEL SET SOME OF THE CHANGES THAT WE SAW THROUGHOUT THOSE PERIODS.

AND, UM, I THINK IT'S IMPORTANT TO NOTE FOR FIRE DURING THIS PERIOD, THERE WAS ALSO A CHANGE IN ACTUARY.

AND SO FROM 2018 THROUGH 2022, UM, SOME OF THE MORE, THE, THE CHANGES WERE AS A RESULT OF, UM, DIFFERING APPROACHES THAT WERE USED BY THE NEW ACTUARY WITH WHICH WE AGREED WITH THE CHANGES THAT THEY MADE.

UM, BUT IT DID, IT WAS, UH, KIND OF WHAT DROVE SPECIFICALLY FOR FIRE.

THAT AMORTIZATION PERIOD GOING FROM 17.9 TO 35.7, UH, WOULD'VE BEEN, IS SOMETHING THAT DEFINITELY STICKS OUT HERE.

UM, GIVEN THAT THE TEXAS PENSION REVIEW BOARD DOES LIKE TO SEE THAT BELOW 30.

[00:30:01]

UH, AND SO IN THIS CASE, UM, THAT'S WHAT TRIGGERED THE, UM, VOLUNTARY FUNDING SOUNDNESS PLAN TO BE PUT INTO, INTO PLACE.

UM, I'M NOT GONNA GO PLAN BY PLAN, I ASSUME YOU ALL ARE FAMILIAR WITH, WITH THESE PLANS.

UM, BUT THE BIGGEST THING THAT STUCK OUT TO US OVER THESE PERIODS IS THAT YOU ARE SEEING A, A MATURING OF THESE PLANS AS EVEN JUST OVER THESE FOUR YEARS WITH THAT ACTIVE TO INACTIVE RATIO GOING DOWN, MEANING THAT THERE'S LESS ACTIVES IN THE PLAN AS COMPARED TO THE INACTIVES, UM, AS A RESULT OF, UM, HIGHER RETIREMENTS THAN IT HAD BEEN EXPECTED.

LESS, UM, LESS NEW HIRES COMING INTO THE PLANS.

UM, THAT'S ALL OF THOSE REASONS ARE OUTSIDE THE SCOPE OF THIS AUDIT, BUT IT DOES IMPACT, UM, AS YOU CONTINUE TO MONITOR THESE PLANS, JUST SOMETHING TO BE AWARE OF THAT THERE IS A, A GENERAL SHIFT IN THAT DIRECTION.

SO I'M JUST GONNA GO THROUGH EACH SECTION OF OUR REPORT.

UM, AND THE, THE MAJOR, THE MAJOR, AGAIN, JUST MEDIUM OR HIGHER PRIORITY FINDINGS THAT CAME OUT OF IT.

UM, SO FIRST OFF, THE REVIEW OF ECONOMIC KEY ECONOMIC ASSUMPTIONS, WHICH ARE USED TO ESTIMATE THE PROJECTED FUTURE BENEFITS.

AND, UM, IN THIS CASE, UH, AGAIN, THESE WERE ALL JUST RECOMMENDATIONS FOR THINGS THAT COULD EITHER MAKE THE REPORT A BIT CLEARER FOR SOMEBODY PICKING IT UP FOR THE FIRST TIME, UM, OR THE CALCULATIONS A BIT, UH, MORE ALIGNED WITH ACTUAL STANDARDS OF PRACTICE.

UH, THE BIGGEST ONES HERE TO FOCUS ON WOULD BE THE SALARY INCREASES.

UM, THIS, THESE WERE SOME, UH, RECOMMENDATIONS THAT WE HAD AROUND ALIGNING THE PAYROLL, PAYROLL GROWTH ASSUMPTION WITH THE ASSUMPTIONS USED FOR OTHER PURPOSES.

THAT WAS SOMETHING THAT CAME UP IN TWO OF THE PLANS.

UM, AND, UH, UH, WITH THE REPORTS THAT WE HAVE, THE ACTUARIES DID HAVE A CHANCE TO RESPOND, AND THOSE RESPONSES HAVE BEEN APPENDED.

AND IN MANY CASES, UM, THE ACTUARY HAD ACKNOWLEDGED THAT THEY COULD PUT MORE DOCUMENTATION AROUND THE ASSUMPTION.

UH, BUT IN MOST CASES, THERE WASN'T ACTUALLY A RESULTING CHANGE TO THE CALCULATION.

IT WAS JUST AROUND DOCUMENTING THEIR APPROACH, UH, WHICH IS A POSITIVE.

THE OTHER KEY ECONOMIC ASSUMPTIONS WOULD BE AT, AT THE EXPENSES THAT ARE USED, UM, THAT ARE ASSUMED IN THE, IN THE CALCULATIONS AND THE COST OF LIVING ADJUSTMENT.

UM, SPECIFICALLY IN THE EXPENSES WE HAD RECOMMENDED FOR ALL THREE OF THE SYSTEMS JUST COMPARING THE HISTORICAL EXPENSES TO SIMILAR SYSTEMS. AND, UM, FOR A FEW OF THEM REVIEWING THE RECENT INCREASES IN EXPENSES, IT JUST STARTED TO DEVIATE FROM THE ASSUMPTION IN THE LAST FEW YEARS, UH, THE COST OF LIVING ADJUSTMENT, THE COLA, UM, THIS WAS SOMETHING THAT THE CHANGE IN ACTUARY, UM, THEY CHOSE TO HANDLE DIFFERENTLY.

AND WE HAD JUST SOME RECOMMENDATIONS AROUND DOCUMENTING, UM, THE APPROACH AND WHY THEY, WHY THEY CHOSE TO APPROACH IT A CERTAIN WAY, UM, ESPECIALLY BECAUSE IT WAS, IT WAS DIFFERENT THAN HOW THE PRIOR ACTUARY HAD PROGRAMMED THAT ASSUMPTION.

SO AGAIN, WE DID NOT IDENTIFY ANY SIGNIFICANT ISSUES WITH THE ECONOMIC ASSUMPTIONS.

UH, WE JUST INCLUDED SOME RECOMMENDATIONS HERE AND IN OUR REPORT FOR FUTURE EXPERIENCE STUDIES, WHICH IS WHEN YOU'LL REVISIT THESE ASSUMPTIONS, UM, THAT ARE UTILIZED IN YOUR EVALUATION REPORTS.

THE OTHER CATEGORY OF ASSUMPTIONS THAT ARE UTILIZED IN EVALUATION WOULD BE THE DEMOGRAPHIC ASSUMPTIONS.

AND THIS HAS MORE TO DO WITH THE CHARACTERISTICS OF THE POPULATION.

UH, AND SO SPECIFICALLY THE, THE AREA WHERE WE HAD THE MOST, UM, THE COMMENTARY AND, UM, AGAIN, THE RESPONSES ARE APPENDED FROM THE PLAN ACTUARY, UH, WOULD BE AROUND THE MORTALITY TABLE.

I THINK THIS IS ONE THAT, UM, IT TENDS TO BE SOMETHING IN OUR INDUSTRY THAT DIFFERENT ACTUARIES APPROACH DIFFERENT WAYS, AND WE JUST WERE FOCUSED ON WHETHER IT COMPLIED WITH THE ACTUARIAL STANDARDS OF PRACTICE AND INDUSTRY BEST PRACTICES.

UH, IN THIS CASE, WE HAD RECOMMENDED SPECIFICALLY FOR, UM, THE CITY EMPLOYEES PENSION SYSTEM TO CONSIDER A STANDARD DISABILITY MORTALITY TABLE.

AND, UM, CONSIDER JUST TAKING A CLOSER LOOK AT THAT DURING THAT NEXT EXPERIENCE STUDY AS THERE, WHAT WE CALL GAINS OR LOSSES WHEN WE'RE SEEING BIGGER DEVIATIONS, UM, IN THE ACTUAL EXPERIENCE FROM THE ASSUMPTION JUST WOULD BE SOMETHING GOOD TO LOOK AT.

UH, THE MORTALITY SCALE HAS TO DO WITH HOW MORTALITY WILL IMPROVE OVER TIME.

AND THERE ARE SOME INDUSTRY STANDARD SCALES, THOUGH IN THE LAST FEW YEARS, THE INDUSTRY HAS SHIFTED HOW THEY, HOW THIS IS RELEASED.

UM, BUT WE HAD RECOMMENDED TAKING A LOOK AT THAT NEWEST SCALE THAT THE NEWEST MODEL THAT'S RELEASED, UM, BY THE SOCIETY OF ACTUARIES TO DETERMINE IF THAT WOULD BE APPROPRIATE IN THIS CASE.

UH, THE COVID IMPLICATIONS, UM, EVERY CITY, EVERY REGION HANDLED, UH, HAS DIFFERENT EXPERIENCE WHEN

[00:35:01]

IT CAME TO, UM, THE LAST FEW YEARS.

AND, UM, WE THERE THE RETIREMENT PLAN EXPERIENCE COMMITTEE, UH, WHICH IS THE SOCIETY OF ACTUARIES COMMITTEE THAT STUDIES MORTALITY.

UM, WE'LL CONTINUE TO PUT OUT RESEARCH IN THIS AREA.

UH, BUT IN, IN THIS CASE, WE JUST RECOMMENDED CONTINUING TO MONITOR THAT.

UM, AS WE GET FURTHER AND FURTHER FROM THE PERIOD OF 20 20, 20 21 , THE OTHER THREE KEY DEMOGRAPHIC ASSUMPTIONS ARE GONNA BE RETIREMENT INCIDENTS, TURNOVER, DISABILITY.

THIS IS ONE THAT THE, THE NEXT EXPERIENCE STUDY SHOULD BE AN INTERESTING ONE AS, UM, THERE WAS A LOT OF EXPERIENCE THAT DEVIATED FROM WHAT WAS TYPICAL IN THE LAST FEW YEARS, AND IT'S NOT CLEAR WHETHER CERTAIN TRENDS WILL CONTINUE.

SO IT WILL REQUIRE DISCRETION FROM THE ACTUARY TO DETERMINE HOW TO USE THAT DATA, WORKING CLOSELY WITH, UM, WITH THE SYSTEMS TO UNDERSTAND THE, HOW THE PAST BEHAVIOR MAY OR MAY NOT INDICATE FUTURE BEHAVIOR.

SO IN THIS CASE, WE WERE FOCUSED ON HOW THE PRIOR EXPERIENCE, THE PRIOR EXPERIENCE STUDY WAS PERFORMED, AND, UH, WE JUST WE'RE POINTING OUT THAT IN THE NEXT ONE THERE WILL, THEY'LL LIKELY BE, UM, A VERY DIFFERENT SET OF DATA TO LOOK AT.

SO WE RECOMMEND REALLY CLOSELY LOOKING AT THAT ASSUMPTION.

UM, AND WE DID SEE THAT THERE WERE RECENT EXPERIENCE GAINS, MEANING THAT THE, THE ASSUMPTION MAY HAVE IN, IN RETIREMENT FOR THE CITY EMPLOYEES MAY BE SLIGHTLY MORE, UM, MORE CONSERVATIVE THAN, THAN NEEDED.

SO IT WAS JUST ANOTHER THING TO LOOK AT AT THE NEXT EXPERIENCE STUDY.

THIS IS TYPICAL WITH THESE DEMOGRAPHIC ASSUMPTIONS.

IT'S NOT SOMETHING YOU'RE GONNA CHANGE IN THE NEXT VALUATION.

YOU REALLY WANNA TAKE THE TIME TO REVIEW THE DATA IN YOUR NEXT STUDY OF, UM, YOU KNOW, THREE TO FIVE YEARS OF DATA, TYPICALLY IN THAT ST EXPERIENCE STUDY.

UH, THE, THE LAST TWO KEY DEMOGRAPHIC ASSUMPTIONS, THE DROP PARTICIPATION, UH, JUST CONTINUING TO MONITOR THE ELECTION ASSUMPTION AS A PREDICTOR OF THAT ACTUAL DROP EXPERIENCE, ESPECIALLY AS YOU SEE THOSE, UH, THE ASSETS IN THAT ARE AFFILIATED WITH THE DROP, UH, CONTINUE TO, TO GROW.

THIS IS JUST A, AN AREA OF, UH, POTENTIAL OPPORTUNITY TO MONITOR MORE CLOSELY.

AND THAT'S TRUE OF, OF ANY CITY THAT HAS A DROP FEATURE.

UM, IT'S JUST SOMETHING TO WATCH AS YOU, UM, AS THE RETIREMENT, UH, INCIDENTS MAY START TO DEVIATE.

AND, UH, JUST SOMETHING THAT WE, UH, WE HAD POINTED OUT CONSIDERING REFINING THE BENEFIT PAYMENT PROJECTIONS TO ACCOUNT FOR, FOR THE VARIANCES HERE.

UM, AND THEN FORM OF PAYMENT ON THE CITY EMPLOYEES WAS, UH, SOMETHING THAT WE HAD FOCUSED ON, UH, REVIEWING THE ACTUAL ELECTION EXPERIENCE.

AND THIS WAS, AGAIN, ONE NOT LIKELY TO CAUSE MATERIAL CHANGE TO THE RESULTS, BUT AN, AN IMPROVEMENT NONETHELESS.

ALRIGHT, THE REVIEW OF THE ACTUARIAL METHODS, UH, AND THIS WAS THE ONE WHERE WE FOCUSED ON THE FUNDING POLICY AND, UH, JUST FOCUSED ON ANYTHING THAT, UM, SO THE ACTUAL METHODS ARE, ARE SUPPOSED TO, UM, MAKE SURE THAT THE FUND, THE PLAN BENEFITS ARE SUFFICIENTLY FUNDED TO BE ABLE TO PAY WHEN THEY NEED TO PAY.

AND IN THIS CASE, WE JUST HAD SOME RECOMMENDATIONS AROUND, UH, THE FUNDING POSITIONS AND FUNDING POLICY SUGGESTIONS.

WE WILL CAVEAT THIS WITH THE FACT THAT, UM, IN MANY CASES, THE FUNDING POLICIES ARE SET IN STATUTE, THERE'S NOT CHANGES THAT CAN BE MADE, AT LEAST NOT QUICKLY.

UH, BUT WE, IT IS UNDER THE SCOPE OF THIS AUDIT TO EVALUATE WHETHER THEY ARE SETTING THE PLAN UP FOR SUCCESS IN TERMS OF BEING ABLE TO FUND THOSE BENEFITS.

AND SO THESE WILL BE, UM, SOME FINDINGS THAT THE, UM, THE SYSTEMS CAN CONSIDER AS THEY LOOK AT, YOU KNOW, ACHIEVING THAT SAME GOAL.

SO BEFORE I MOVE FORWARD, I'LL JUST HIGHLIGHT ONCE MORE THAT THE, UM, THE FIRE SYSTEM IS, IS NOT PROJECTED TO BE FULLY FUNDED WITHIN 30 YEARS, WHICH IS WHAT TRIGGERED THAT VOLUNTARY SUN SOUNDNESS, UM, FUNDING PLAN, UH, TO BE IN PLACE AND THAT LIKELY SHOULD.

UM, SO THE NEXT TIME YOU DO AN AUDIT LIKE THIS, I WOULD EXPECT THAT THAT, UH, WOULD BE, UH, BACK UNDER THE 30 YEAR MARK CENSUS DATA.

THIS IS, UH, THESE ARE VERY MUCH LOW PRIORITY ITEMS. WE MADE SOME SUGGESTIONS ON ADDITIONAL CENSUS DATA STATISTICS AND INFORMATION TO INCLUDE.

UM, BUT I, I'M NOT GONNA BELABOR THIS.

UH, THERE'S DEFINITELY WAS NOTHING THAT EVEN ROSE TO MEDIUM CONCERN AROUND THE CENSUS DATA, WHICH IS A BIG SUCCESS FOR, UH, FOR CITY SYSTEMS, UM, COMPARED TO OTHERS THAT WE'VE AUDITED.

[00:40:03]

UH, SO GETTING TO THE LAST COUPLE SECTIONS HERE, UH, THIS REVIEW OF THE STATE'S REQUIREMENTS, UH, JUST MAKING SURE THAT THE PLANS ARE IN ACCORDANCE WITH THE TEXAS GOVERNMENT CODE.

UH, AND HERE WE, UH, UH, REALLY THE ONLY FINDING WAS THAT AROUND THE FIRES AMORTIZATION PERIOD, AND WE FOUND THAT ALL THE PLANS DO APPEAR TO BE IN COMPLIANCE WITH THE TEXAS GOVERNMENT CODE TITLE EIGHT AND THE GUIDELINES FOR ACTUARIAL SOUNDNESS.

SO AGAIN, A BIG SUCCESS AND, UM, FOUND THAT THE, THE IN ADDITION, THAT THE SYSTEMS ARE IN COMPLIANCE WITH THEIR OWN FUNDING REQUIREMENTS, UM, THAT MAY DIFFER BY EACH PLAN.

SO THE LAST SECTION HERE, REQUIREMENT FOR US IS TO MAKE SURE, AGAIN, THAT THE STAKEHOLDERS CAN UNDERSTAND THIS INFORMATION.

THERE'S A LOT OF ACTUARIAL STANDARDS OF PRACTICE EVEN OVER THE LAST DECADE THAT HAVE BEEN FOCUSED ON THIS.

NOT JUST THAT THE ACTUARIES ARE CALCULATING THE NUMBERS, BUT THAT THOSE THAT NEED TO UNDERSTAND THEM ARE ABLE TO GLEAN WHAT THEY NEED TO.

AND SO IN THIS CASE, UH, WE JUST HAD SOME SUGGESTIONS FOR, UM, THE DIFFERENT PLANS TO BE ABLE TO PROVIDE A GAIN LOSS BREAKDOWN.

THAT'S REALLY HOW DID YOUR ACTUAL EXPERIENCE DIFFER FROM, UH, WHAT WAS EXPECTED? AND IT, WE FOUND THAT FOR FIRE AND THE CITY EMPLOYEES PLANS THAT THOSE WERE SUFFICIENT.

UM, AND THAT THERE COULD BE A MORE COMPREHENSIVE BREAKDOWN FOR, UM, FOR THE, FOR A PRS.

UH, WE DID ALSO SEE THAT FOR SENSITIVITY TESTS, THIS CAN BE REALLY HELPFUL FOR A USER TO UNDERSTAND HOW SENSITIVE THESE LIABILITIES ARE AND THE OVERALL RESULTS ARE TO DIFFERENT CHANGES IN THE ENVIRONMENT AND, UH, WOULD BE HELPFUL TO SEE THAT IN THE OTHER TWO PLANS.

UM, IN ADDITION TO, IT'S ALREADY BEING INCLUDED FOR FIRE, THERE IS A NEW ACTUARIAL STANDARD OF PRACTICE THAT HADN'T YET APPLIED TO THE REPORTS THAT WE REVIEWED.

UH, BUT GOING FORWARD, THE ACTUARIAL ACTUARY WILL BE REQUIRED TO CALCULATE A LOW DEFAULT RISK OBLIGATION MEASURE OF THE BENEFITS.

AND SO THAT'S THE ACT THAT THE ACTUARY IS, UH, REQUIRED TO PERFORM THE RESULTS USING A DISCOUNT RATE, UH, THAT'S CONSISTENT WITH A LOW DEFAULT RISK FIXED INCOME SECURITIES.

UH, AND THAT'LL BE SOMETHING THAT SHOULD BE IMPACTING FUTURE RESULTS THAT YOU SEE AND THE ACTUARIES ARE LIKELY AWARE AND ALREADY INCORPORATING THEM.

UM, BUT IT WAS SOMETHING WE, WE HAD ON OUR RADAR TO BRING UP.

SO IN SUMMARY, THE ONLY FINDING OF HIGH SIGNIFICANCE HAS TO DO WITH FIRES AMORTIZATION PERIOD AND OVER 30 YEARS.

AND, UH, JUST ENDED BY SAYING WE DID NOT IDENT DI IDENTIFY ANY SIGNIFICANT ISSUES OTHER THAN THAT, UM, WITH RESPECT TO THE ASSUMPTIONS, METHODS, DATA, STATE REQUIREMENTS, OR REPORT COMMUNICATIONS.

UH, AND SO WE'VE, WE'VE SUMMARIZED THAT HERE THAT THERE WERE SOME OTHER FINDINGS THAT ROSE TO THE LEVEL OF LOW OR EVEN MEDIUM IMPACT, BUT, UH, THESE ARE JUST RECOMMENDATIONS FOR CONTINUING TO, FOR THE ACTUARIES TO CONTINUE TO REVIEW AS THEY PREPARE THEIR EVALUATIONS AND EXPERIENCE STUDIES.

THANK YOU.

UM, MS. , UM, SO AGAIN, UM, REALLY APPRECIATIVE OF OUR STAFF WHO HAVE WORKED TOGETHER WITH THIS COMMITTEE OVER THE LAST SEVERAL YEARS TO ASSURE THE SOUNDNESS OF OUR PENSION SYSTEM.

I THINK I SPEAK FOR EVERYONE ON THE DA AND, AND ALL OF OUR STAFF THAT IT IS REALLY, REALLY IMPORTANT THAT WE, UM, MAKE SURE THAT WE ARE PLANNING FOR THE PENSIONS FOR THE PEOPLE WHO HAVE SERVED OUR COMMUNITY SO WELL, MANY OF WHOM IN THESE CASES ALSO HAVE RISKED THEIR LIVES, UM, IN THE PROCESS.

AND SO WE HAVE A FIDUCIARY RESPONSIBILITY AND A MORAL RESPONSIBILITY TO MAKE SURE, UM, THAT OUR PENSION SYSTEMS ARE SOUND.

UM, YOU KNOW, AS YOU NOTED, UM, OVER THE YEARS WE HAVE ADDRESSED, UM, CHALLENGES TO A PRS AND COS, UM, AND WE HAVE A CURRENT PATH MOVING FORWARD, UM, FOR FIRE.

UM, I WANTED TO ASK OUR STAFF IF THEY COULD JUST REALLY BRIEFLY SPEAK TO THE NEXT STEPS ON FIRE, IF THAT'S APPROPRIATE AT THIS POINT, BECAUSE I'M SURE THE QUESTIONS WILL COME UP AND I THINK WE SHOULD JUST BE TRANSPARENT ABOUT WHERE WE ARE IN THAT PROCESS AND, AND THE KEY, THE KEY ELEMENTS TO THE EXTENT THAT YOU CAN SHARE RIGHT NOW.

GOOD MORNING, CHIEF.

WELL OFFICER, WE HAVE HAD SEVERAL VERY PRODUCTIVE CONVERSATIONS WITH THE FIRE RETIREMENT SYSTEM TO DATE.

OUR NEXT MEETING IS ON MAY 17TH, UM, AND WE WILL CONTINUE TO HAVE MEETINGS LEADING UP TO THE 89TH LEGISLATURE.

THE GOAL WOULD BE TO HAVE A BILL FILED JANUARY 1ST, 2025 IN THAT LEGISLATIVE SESSION THAT WOULD IMPLEMENT SIMILAR REFORMS THAT WERE PUT IN PLACE FOR COS AND THE POLICE RETIREMENT SYSTEM.

[00:45:01]

ESSENTIALLY A LOWER, UH, UH, BENEFIT TIER FOR NEW HIRES, INCREASED FUNDING, UM, AND, AND SOME GOVERNANCE CHANGES TO THE, TO THE SYSTEMS. THANK YOU.

AND, UM, IS THE CITY PORTION OF THAT FUNDING ALREADY CAPTURED IN THE FORECAST FOR THIS BUDGET? THE, UH, THE CITY'S PORTION? UH, YES, WE HAVE FUNDING IN THE, UH, FORECAST IN ANTICIPATION OF A SUCCESSFULLY GETTING A, A BILL APPROVED WITH THE FIRE RETIREMENT SYSTEM.

GREAT, THANK YOU.

UM, AND THEN I ALSO WANTED TO ACKNOWLEDGE, UM, THE SERVICE OF MY COLLEAGUES ON THESE VARIOUS PENSION BOARDS.

UM, COUNCIL MEMBER POOL HAS SERVED ON COORS FOR MANY YEARS.

I BELIEVE THAT COUNCIL MEMBER KELLY IS STILL ON THE POLICE RETIREMENT SYSTEM AND, UH, MAYOR WATSON IS SERVING ON THE FIRE SYSTEM, AND I IMAGINE THAT WE HAVE SEVERAL MEMBERS OF OUR FINANCIAL STAFF WHO ALSO SERVE, UM, ON THOSE BOARDS WHO ARE HERE.

UM, I DON'T HAPPEN TO KNOW WHICH ONES YOU'RE ON, BUT I KNOW, KNOW THAT YOU'RE ON IT AND WE APPRECIATE, UM, YOUR IMPORTANT WORK HELPING TO STEWARD THAT.

UM, COLLEAGUES, ARE THERE ANY OTHER QUESTIONS OR COMMENTS? OKAY, THANK YOU VERY MUCH.

THANK YOU GUYS.

REALLY APPRECIATE IT.

THANK YOU.

FIGURE OUT WHERE WE'RE GOING NEXT HERE.

I THINK WE ARE GOING TO APPROVE THE MINUTES,

[1. Approve the minutes of the Audit and Finance Committee meeting of March 27, 2024.]

SO IF I COULD HAVE A MOTION TO APPROVE THE MINUTES.

COUNCIL MEMBER FUENTES MOVES APPROVAL.

COUNCIL MEMBER KELLY SECONDS.

UM, IF THERE ARE NO OBJECTIONS, THE MINUTES WILL BE APPROVED.

UM, WE WILL NOW MOVE TO ITEM

[5. Update from the Office of the City Auditor on the status of recommendations from previous audits.]

FIVE.

HOLD ON A SECOND.

I THINK WE'LL NOW MOVE TO ITEM FIVE.

YES, WHICH IS AN UPDATE FROM THE OFFICE OF CITY AUDITOR ON THE STATUS OF RECOMMENDATIONS FROM PREVIOUS AUDITS.

GOOD MORNING.

GOOD MORNING.

UH, JASON AVI, DEPUTY CITY AUDITOR.

I'M GOING TO PRESENT OUR SEMI-ANNUAL PRESENTATION ON THE STATUS OF AUDIT RECOMMENDATIONS.

AS YOU'LL RECALL, BACK IN OCTOBER OF LAST YEAR, WE IMPLEMENTED A NEW RECOMMENDATION TRACKING SYSTEM.

WE ARE UTILIZING OUR NEW AUDIT SYSTEM CALLED MISSION MARK, WHICH CONTAINS, UH, RECOMMENDATION TRACKING PLATFORM AND A PUBLIC DASHBOARD.

THE SCREENSHOT IS HERE, THAT'S NOT A CURRENT, UH, SCREENSHOT.

IT'S A FEW WEEKS OLD.

WHEN WE IMPLEMENTED MISSION MARK, WE UPLOADED RECOMMENDATIONS DATING BACK THROUGH 2019.

WE ARE ALSO TRACKING THE STATUS OF RECOMMENDATIONS BETWEEN 2014 AND 2018.

WE'RE TRACKING THOSE OFFLINE WELL, SO WE'LL STILL BE REPORTING ON THOSE UNTIL THEY ARE ALL IMPLEMENTED, BUT THOSE WILL NOT BE SEEN IN THE PUBLIC DASHBOARD.

UH, WHEN WE IMPLEMENTED THIS PROCESS, WE, WE DIDN'T REALLY, I DIDN'T ANTICIPATE THE AMOUNT OF WORKLOAD THAT WAS GONNA COME WITH IT, AND SO I'M REALLY PLEASED WITH HOW MUCH MANAGEMENT HAS CONTRIBUTED TO THIS, HOW MUCH THE AUDITORS HAVE BEEN WORKING ON THIS.

THERE'S BEEN A LOT OF WORK, A LOT OF ELBOW GREASE GOING INTO THIS, AND WE'RE REALLY PLEASED WITH THE PROGRESS WE'VE SEEN SO FAR.

UH, IN PARTICULAR I'D LIKE TO CALL ATTENTION TO THE WORK THAT'S BEEN DONE BY AUSTIN WATER, BY OUR CTM AND ISO DEPARTMENTS, AS WELL AS OUR DEVELOPMENT SERVICES DEPARTMENTS.

THEY'VE COLLABORATE, COLLABORATED WITH US REALLY WELL, WORKED REALLY HARD, IMPLEMENTED PLENTY OF RECOMMENDATIONS.

I'LL GET INTO THE STATS IN JUST A LITTLE BIT, BUT THIS WAS A BIG UNDERTAKING.

WE'VE TAKEN A LOT OF RECOMMENDATIONS OVER SEVERAL YEARS AND WE'VE SWITCHED FROM LOOKING AT JUST SPECIFIC RECOMMENDATIONS FROM SPECIFIC AUDITS TO FOLLOWING UP AND MONITORING THE IMPLEMENTATION OF EVERY SINGLE RECOMMENDATION.

AND IT'S BEEN, IT'S BEEN A BIG WORKLOAD, BUT THERE'S BEEN A LOT OF PROGRESS AND I'M REALLY HAPPY ABOUT THE IMPACT THAT, THAT THE RESIDENTS WILL BE SEEING FROM THIS WORK.

SO GETTING INTO SOME OF THE STATS, HERE IS A TABLE THAT SHOWS THE PROGRESS BETWEEN OCTOBER OF LAST YEAR AND, UH, IT SAYS APRIL, BUT ACTUALLY THIS WAS UPDATED, UH, EARLIER THIS WEEK.

SO EARLY MAY.

YOU CAN SEE THAT WE'VE DOUBLED THE NUMBER OF IMPLEMENTA IMPLEMENTED RECOMMENDATIONS IN THAT, IN THAT SEVERAL MONTH PERIOD.

THE READY FOR REVIEW STATUS, THAT'S WHAT'S IN THE AUDITOR'S QUEUE, THAT'S WHAT WE HAVE TO LOOK AT.

THAT NUMBER IS ALWAYS MOVING UP AND DOWN DEPENDING ON, UH, WHAT WE'RE SEEING WITH THE RECOMMENDATIONS THAT MANAGEMENT'S WORKING ON THE NUMBER OF IN PROGRESS AND NOT STARTED RECOMMENDATIONS HAVE BOTH DECREASED.

SO ALL OF THESE ARE GOOD SIGNS.

ALL OF THESE ARE INDICATIONS THAT WE'RE MOVING IN A POSITIVE DIRECTION THAT WE'RE MAKING IMPROVEMENTS AND RECOMMENDATIONS ARE BEING IMPLEMENTED.

LOOKING AT THOSE RECOMMENDATIONS FROM 2014 THROUGH 2018, THESE ARE THE PRE MISSION MARK RECOMMENDATIONS, IS WHAT I CALL THEM.

WE'RE ALSO MOVING IN THE RIGHT DIRECTION.

WE, WE'VE, UH, INCREASED OR IMPLEMENTED BY 12 AND OUR IN PROGRESS IS ONLY GONE UP BY ONE.

THAT'S, THAT HAPPENS WHEN SOMETHING IS IN READY FOR REVIEW.

THE AUDITORS ARE LOOKING AT IT AND MOST OF THOSE ARE MOVING INTO AN IMPLEMENTED

[00:50:01]

STATUS.

AND THEN WHERE WE'RE LOOKING FOR A LITTLE BIT MORE DOCUMENTATION OR A LITTLE BIT MORE INFORMATION ON A RECOMMENDATION WE'LL RETURN IT TO IN PROGRESS, BUT THINGS ARE HEADED IN, IN THE RIGHT DIRECTION AND BOTH THE READY FOR REVIEW AND IN PROGRESS NUMBERS FOR THOSE PRE MISSION MARK RECOMMENDATIONS HAVE GONE DOWN.

AND I'M LOOKING FORWARD TO THOSE BECOMING ZERO IN THE NOT TOO DISTANT FUTURE AND THEN ONLY FOCUSING ON WHAT CAN BE SEEN ON THE PUBLIC DASHBOARD.

SO WITH THAT, I CAN ANSWER ANY QUESTIONS THAT YOU MAY HAVE.

ALL GOOD.

THANK YOU.

COUNCIL MEMBER FUENTES, JUST A COMMENT, JUST THANK YOU FOR THE WORK THAT Y'ALL ARE DOING.

THIS INFORMATION IS REALLY VALUABLE AND I APPRECIATE ALL THE AUDIT REPORTS AND, AND SPECIAL REPORTS THAT YOUR OFFICE UNDERTAKES.

SO KNOWING THAT WE ARE KEEPING THE SYSTEM ACCOUNTABLE, ENSURING THAT THEY GET IMPLEMENTED OR IN PROGRESS IS, IS IMPORTANT.

SO THANK YOU.

THANK YOU, THANK YOU MR. AVI, UM, FOR, YOU KNOW, IMPLEMENTING THIS AND, AND I WANT TO ACKNOWLEDGE SAMMY CARLOS WHO'S HERE, UM, FOR HER WORK ON THIS IN THE CITY MANAGER'S OFFICE.

UM, YOU KNOW, IT HAS BEEN REALLY IMPORTANT TO HAVE SOMEBODY IN THE CITY MANAGER'S OFFICE, UM, NOT JUST THE AUDITOR'S OFFICE, UM, PRIORITIZING US GETTING THESE RECOMMENDATIONS IMPLEMENTED AND WORKING WITH THE AUDITOR'S OFFICE.

UM, I APPRECIATE YOU, UM, YOU KNOW, FLAGGING THOSE DEPARTMENTS THAT HAVE BEEN, UM, REALLY LEANING IN TO THE AUDITS AND, UM, SOME OF THOSE HAD, YOU KNOW, AUDITS THAT WERE RELATIVELY RECENT OR, OR DIFFERENT ENTRIES AND THEY HAVE BEEN, UM, YOU KNOW, I'VE BEEN MORE INVOLVED WITH AUSTIN WATER AND CYBER, UM, AND CTM, UM, BUT THEY'VE ALL BEEN, YOU KNOW, REALLY, REALLY, UH, WORKING ON THAT.

UM, THERE ARE SOME AREAS WHERE WE HAVE HAD A LOT OF AUDIT RECOMMENDATIONS THAT YOU DIDN'T TOUCH ON, SO I WANTED TO GET A SENSE, UM, FOR AUSTIN PUBLIC HEALTH, HRD AND A PD, UM, WHERE THEY'RE AT WITH RESPECT TO THEIR AUDIT RECOMMENDATIONS.

SURE.

UH, HHRD, WE'VE JUST VERY RECENTLY, I THINK CROSSED THE, ACROSS THE LINE OF HAVING ALL OF THOSE RECOMMENDATIONS IMPLEMENTED, THAT THAT INCLUDES AUDITS, BOTH THAT CAN BE SEEN ON THE PUBLIC DASHBOARD AND THOSE THAT ARE PRE MISSION MARK SO THAT WE'VE TRACKED, UH, WE'VE TRACKED OFFLINE FOR A PD.

THERE'S, THERE'S SOME RECOMMENDATIONS THAT HAVE BEEN IMPLEMENTED BOTH IN THE PRE MISSION MARK AND ON THE PUBLIC DASHBOARD.

AND THEY'VE MOVED SEVERAL INTO THE READY FOR REVIEW.

SO THEY'VE KIND OF PUSHED THE WORK INTO, INTO RQ AND NOW IT'S INCUMBENT UPON US TO GO AND FOLLOW UP ON THOSE.

SO WE'LL BE LOOKING AT THOSE, HOPEFULLY MOVING THOSE INTO AN IMPLEMENTED STATUS.

AND, UH, I'M SORRY, YOU SAID A PH AND, AND A PH.

UM, SO WE HAVE A PH RECOMMENDATIONS ACROSS, UH, A FEW DIFFERENT DEPARTMENTS, OR I'M SORRY, A FEW DIFFERENT AUDITS.

SOME OF THOSE HAVE BEEN IMPLEMENTED.

I KNOW THERE'S AT LEAST ONE OR TWO THAT ARE STILL OUTSTANDING FROM THE, UH, OLDER ADULTS.

SO AGAIN, PROGRESS IN THE RIGHT DIRECTION.

WE HAVEN'T GOT ALL OF THEM IMPLEMENTED QUITE YET, BUT I, I AM REALLY PLEASED AND OPTIMISTIC WITH WHAT WE'VE SEEN THUS FAR.

GREAT.

THANK YOU VERY MUCH.

AND COLLEAGUES, ANY OTHER QUESTIONS OR COMMENTS? GREAT, WELL THANK YOU VERY MUCH.

THANK YOU.

OUR NEXT ITEM IS

[6. Results from an audit of the criminal background investigation process.]

THE AUDIT OF THE CRIMINAL BACKGROUND INVESTIGATION PROCESS.

GOOD MORNING MEMBERS.

I'M NEHA SHEMA IT AUDIT MANAGER.

THIS AUDIT WAS PERFORMED BY AN EXTERNAL CONTRACTOR.

I ALSO SAW THIS PROJECT AND WILL PRESENT THE WORK OF THE CONSULTANT.

WHAT IS C-B-I-C-B-I IS A PROCESS OF OBTAINING AND REVIEWING AN INDIVIDUAL'S CRIMINAL HISTORY RECORDS FROM LAW ENFORCEMENT AGENCIES AND OTHER SOURCES.

THIS INVESTIGATION IS PERFORMED WHEN AN INDIVIDUAL'S CRIMINAL HISTORY RECORDS POSES A RISK TO THE CITY.

THE CITY'S HUMAN RESOURCE DEPARTMENT MANAGES THE CITY'S CBI PROCESS BY ESTABLISHING PROCEDURES AND OVERSEEING THEIR IMPLEMENTATION.

THE CITY REQUIRES CBI FOR THE POSITIONS THAT INVOLVE FINANCIAL RESPONSIBILITIES, INTERACTION WITH VULNERABLE POPULATION OR COMBINATIONS OF BOTH.

FOR THIS AUDIT, THE CONSULTANT LOOKED AT IF THE CITY'S CBI PROCESS OPERATES EFFECTIVELY AND EFFICIENTLY.

RECENTLY, HRD IMPLEMENTED A NEW ELECTRONIC SYSTEM FOR PROCESSING CBIS.

HR STAFF ACROSS VARIOUS CITY DEPARTMENTS HAVE NOTED IMPROVEMENTS IN THE CITY PROCESS DUE TO

[00:55:01]

THE CHANGE, SPECIFICALLY WITH THE NEW SYSTEM, THE CBI PROCESSING CAN BE COMPLETED FASTER.

HOWEVER, HRD DOES NOT ENSURE DEPARTMENTS CORRECTLY IDENTIFY POSITIONS THAT REQUIRE A CBI AND DOES NOT ENSURE DEPARTMENTS FILL THOSE POSITIONS WITH INDIVIDUALS WHO PASS A CBI.

I WILL COVER THESE ISSUES IN NEXT SLIDES.

FIRST, I WILL DISCUSS THE ISSUES RELATED TO IDENTIFICATION OF C SENSITIVE POSITIONS.

THE HRD PROCEDURES OUTLINE WHICH POSITIONS REQUIRE A CVI.

HOWEVER, THE LIMITATIONS IN THESE PROCEDURES INCREASE THE LIKELIHOOD THAT CITY DEPARTMENTS WILL NOT CORRECTLY IDENTIFY THESE POSITIONS.

FOR EXAMPLE, AS SHOWN IN THE SLIDE, THE PROCEDURES DO NOT PROVIDE THE DEFINITION OF DISABLED OR ELDERLY.

THE PROCEDURE ALSO DO NOT MENTION OTHER POTENTIALLY VULNERABLE POPULATIONS SUCH AS THOSE EXPERIENCING HOMELESSNESS.

THE LACK OF CLEAR GUIDANCE MAY LEAD TO INCONSISTENCIES ACROSS CITY DEPARTMENTS.

IN IDENTIFYING CBI SENSITIVE POSITIONS DURING THIS REVIEW, IT WAS OBSERVED THAT TWO DEPARTMENTS CLASSIFY THE SAME POSITION WITH IDENTICAL JOB RESPONSIBILITIES DIFFERENTLY.

ONE IDENTIFIED AS CBI SENSITIVE WHILE OTHERS DID NOT.

FOR THE REVIEW OF POSITIONS AT A STAFF STATED THAT THEY HAVE A PROCESS IN PLACE TO REGULARLY REVIEW PRO CARD USERS.

HOWEVER, THEY DO NOT REVIEW OTHER TYPES OF CBI SENSITIVE POSITIONS.

IT APPEARS THAT THE PROCESS FOR REVIEW OF PRO CARD USERS IS NOT WORKING EFFECTIVELY IN OUR TESTING OF 10 CITY EMPLOYEES WITH ACCESS TO A CREDIT CARD SYSTEM, WE IDENTIFIED SIX DID NOT HAVE A CBI.

WHILE THE CBI PROCEDURES REQUIRE CITY DEPARTMENTS TO IDENTIFY CBI SENSITIVE POSITIONS THE RESPONSIBILITY TO VERIFY THAT DEPARTMENTS HAVE CORRECTLY IDENTIFIED SUCH POSITIONS LIES WITH HRDI WILL NOW TALK ABOUT ISSUES RELATED TO FILLING THE IDENTIFIED CBI SENSITIVE POSITIONS.

THERE ARE SEVERAL ISSUES NOTED IN THIS AREA.

THE PROCESS OF REVIEWING CRIMINAL HISTORY AND RECORDING OF CBI OUTCOME IS PERFORMED BY ONE PERSON.

THEIR WORK IS NOT REVIEWED BY ANOTHER PERSON OR SUPERVISOR.

THIS INCREASES THE RISK THAT THE CBIS COULD BE INACCURATELY OR IMPROPERLY PROCESSED.

HID POLICY REQUIRES CBI RECHECK FOR THE CBI SENSITIVE POSITIONS FOR POSITIONS WITH ACCESS TO VULNERABLE POPULATIONS.

A RECHECK IS REQUIRED EVERY ONE YEAR.

AND FOR POSITIONS WITH FINANCIAL RESPONSIBILITIES, RECHECK IS REQUIRED EVERY TWO YEAR FOR A SAMPLE OF 22.

INDIVIDUALS IN CBI SENSITIVE POSITIONS REJECT WERE NOT DONE ACCORDING TO HRT POLICY FOR ONE INDIVIDUAL, THE HR SYSTEMS WHICH IS USED TO RECORD CBI OUTCOME IS NOT CONNECTED TO HR SYSTEM, WHICH IS USED TO PROCESS AND FILL JOB POSITIONS.

THIS MEANS DEPARTMENTS CAN FILL CBI SENSITIVE POSITIONS WITHOUT FIRST CONDUCTING CBI OR CAN FILL THESE POSITIONS WITH INDIVIDUALS WHO DO NOT PASS A CBI.

LASTLY, AS A PART OF THE CBI PROCESS, INDIVIDUALS ARE REQUIRED TO SELF-CERTIFY THEIR RESIDENTIAL HISTORY FOR LAST SEVEN YEARS.

HRD UTILIZES THIS SEVEN YEAR TIMEFRAME WHEN CONDUCTING A CBI.

IF AN INDIVIDUAL INDICATES THAT THEY HAVE ONLY LIVED IN TEXAS DURING THIS PERIOD, HRD OBTAINS AND REVIEWS THEIR CRIMINAL HISTORY RECORDS FROM THE TEXAS DEPARTMENT OF PUBLIC SAFETY AND FOR INDIVIDUAL WHO LIVED OUTSIDE TEXAS DURING THE SPECIFIED TIMEFRAME, HRD OBTAINS AND REVIEWS FBI RECORDS.

SINCE THE TEXAS DPS ONLY PROVIDES CRIMINAL RECORDS WITHIN TEXAS, THE REVIEW WOULD NOT IDENTIFY ARREST OR CONVICTIONS FROM OTHER STATES.

THE HRD MANAGEMENT HAS INDICATED THAT THE IMPLEMENTATION OF A NEW SYSTEM FOR, UH, FOR HR, UH, PROCESSING AND LIKE FILLING OF THE POSITIONS AND EVERYTHING AND THE OUTSOURCING OR PART OF CBA PROCESS MAY MITIGATE SOME ISSUES IDENTIFIED IN THIS AUDIT.

THERE ARE THREE RECOMMENDATIONS FOR THIS AUDIT.

[01:00:01]

THE FIRST RECOMMENDATION REQUIRES THE HR DIRECTOR TO PROVIDE FURTHER GUIDANCE TO ENSURE CORRECT AND CONSISTENT IDENTIFICATION POSITIONS THAT REQUIRES CBIS AND TO IMPLEMENT A PROCESS TO PERIODICALLY REVIEW POSITIONS.

FOR THE SECOND RECOMMENDATION, WE SUGGESTED THAT MANAGEMENT ESTABLISH A PROCESS TO VERIFY CBI OUTCOMES.

THE LAST RECOMMENDATION REQUIRES THE HR DIRECTOR TO ENSURE THAT ANY PLAN CHANGES ADDRESS THE ISSUES IDENTIFIED IN THIS AUDIT.

THE MANAGEMENT HAS AGREED WITH OUR RECOMMENDATIONS.

THIS CONCLUDES MY PRESENTATION.

I'M HAPPY TO ANSWER ANY QUESTIONS.

THANK YOU.

UM, COLLEAGUES, ANY QUESTIONS? UM, THANK YOU.

DID HRD WANT TO RESPOND AT ALL? REBECCA KENNEDY WITH HUMAN RESOURCES, WE AGREE WITH THE RECOMMENDATIONS IN OUR WORKING WITH, UM, PROCUREMENT RIGHT NOW TO PROCURE A EXTERNAL VENDOR TO WORK WITH US IN CONDUCTING CBIS AND ALSO WITH THE IMPLEMENTATION OF WORKDAY.

AS, UH, NEHA MENTIONED, WE DO HAVE THREE DESPERATE SYSTEMS THAT ARE WORKING, UH, TO RUN OUR CBIS RIGHT NOW WHEN WE HAVE THE UPDATED HUMAN CAPITAL MANAGEMENT SYSTEM, THIS WILL PUT IT IN ONE SYSTEM, WHICH WILL MAKE IT MUCH EASIER FOR US TO AUDIT.

THANK YOU.

WHILE I HAVE YOU HERE, WHEN WILL THE HUMAN CAPITAL MANAGEMENT SYSTEM BE FULLY? WE ARE IN THE MIDDLE OF DESIGNING AND I AM VERY HAPPY TO SAY WE SEE AN END IN SIGHT AND WE ARE LOOKING AT, UM, LATE 2024, EARLY 2025 FOR THAT TO BE IMPLEMENTED.

GREAT.

THANK YOU.

THANK YOU.

I'M GLAD TO SEE THAT MOVING FORWARD.

THANK YOU.

UM, THEN WE WILL NOW MOVE TO, IF THERE ARE NO OTHER QUESTIONS FROM MY COLLEAGUES.

UM, THANK YOU.

AND WE WILL MOVE TO ITEM TWO, UM,

[2. Proposed bylaw amendments for the Joint Sustainability Committee.]

THE JOINT SUSTAINABILITY COMMITTEE BYLAWS.

GOOD MORNING, STEPHANIE HALL, ASSISTANT CITY CLERK.

I'M HERE TO PRESENT YOU THIS MORNING WITH SOME PROPOSED BYLAW AMENDMENTS FROM THE JOINT SUSTAINABILITY COMMITTEE THAT THEY JUST RECENTLY APPROVED.

EXCUSE ME.

WHAT I'M REFERENCING IS IN THE BACKUP AND WE'RE JUST GONNA SHOW THE REDLINE BYLAWS UP THERE.

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