Auditors outline FY25 work plan, flag capital assets and accounting-system update; explain GASB 101 impact

Megan Arkenbraith, partner at Brown Edwards, told the Albemarle County Audit Committee on May 19 that the firm had circulated a required planning-communication letter and would focus FY25 audit work on three main risks: management override, capital assets, and procedures related to the county's recent accounting-system update.

The planning communication letter "is pretty standard" and identifies auditor and management responsibilities, Arkenbraith said. "It does have a list of questions related to fraud. This is not because we have any concerns about fraud. It's because we are required to open the doors, and open that pathway of communication with the school board and the board of supervisors," she said.

The auditors said the three identified risks will receive targeted procedures. Management override is treated as an inherent, standing risk. Capital assets remain a risk because prior management-letter comments and turnover in the capital-assets function require closer review. The accounting-system update (the county's move to Tyler) will also be examined to ensure recorded amounts and outputs from the new software are accurate.

Addison Rushley, an auditor with Brown Edwards, described a tentative fieldwork schedule for the coming months: preliminary on-site procedures in June (including APA and VRS testing and internal-controls review), work with schools on activity funds in July, single-audit testing for federal programs (typically Medicaid and child nutrition) beginning in August, heavier on-site work in September and October, remote follow-up and financial-statement preparation through November, and a goal of a finalized report for the board meeting in December.

Rushley also outlined the impact of GASB Statement No. 101 (compensated absences). Under the new guidance, governments must estimate liabilities not only for leave expected to be paid at termination but also for leave that employees may use and be paid for during employment (for example, sick leave taken during employment). "The largest impact that it's gonna have is on the government-wide statements for the county and for the schools relating to long term and short term liabilities for sick leave and vacation leave," Rushley said. He said the estimate will generally increase the reported liability on the government-wide statements but will not affect fund-level statements such as the general fund or school operating funds.

Arkenbraith and Rushley said they have begun working with county staff on methodology for the compensated-absences estimate and plan to discuss it at preliminary fieldwork. "We are gonna have a lot more conversations about this at preliminary as well because it's an estimated liability," Arkenbraith said.

The auditors noted the change should not affect budgetary reporting at the fund level because the liability sits on government-wide statements. They advised that historical payroll and HR reporting will be used to develop the estimate and that the county should prepare methodology documentation in advance of year-end.

The auditors asked committee members to raise any concerns directly with them and said their procedures include routine inquiries about fraud with employees as part of standard audit work.

The presentation closed with an invitation for committee questions; none were raised at the meeting.

The matters discussed were information items and planning steps for the FY25 audit; no committee action was taken on audit procedures or GASB implementation during the session.