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Board questions budget controls as county staff outline D365, payroll drivers and proposed use of fund balance
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Summary
County finance staff presented how Microsoft D365 tracks budgets and controls; board members probed payroll drivers — comp time and market adjustments — and discussed a proposed use of roughly $3.2 million from fund balance to cover shortfalls, prompting plans for policy changes and improved reporting.
County finance leadership and the auditor's office presented internal controls and the county's use of Microsoft Dynamics 365 (D365) for budgeting and purchasing during the Feb. 12 McHenry County Board meeting, then answered extended questions from members about fund balances, payroll drivers and reporting improvements.
CFO Carrie Weiss walked the board through D365 budgeting dimensions, including main accounts, object levels and fund/department dimensions; she demonstrated budget analysis reports and described hard stops D365 imposes for budget errors. Auditor Shannon Tureci explained the auditor's role in approving purchase orders and requisitions and described anti‑fraud and segregation‑of‑duties reviews. Weiss and Tureci said migrating the bank reconciliation process into D365 had improved end‑to‑end visibility and auditability.
Board discussion focused on personnel costs and the mechanics of a proposed resolution that would draw approximately $3.2 million from fund balance to cover several department shortfalls. Member Scala said the motion would "pull approximately $3,200,000 from fund balance" to pay for expenses that include sheriff's payroll variances, IMRF and FICA shortfalls and Valley High operational ramp‑ups. Weiss said the variance arises from multiple causes: market adjustments to union contracts approved near budget adoption in 2024–25, fewer vacancies than projected (meaning the previous cushion from vacancy savings did not materialize), benefit‑coverage differences (single vs. family insurance), and the need to better account for comp‑time payouts.
The sheriff's office described how comp time is accrued, carried and cashed out under bargaining agreements and said a market adjustment payout not fully built into the '25 budget contributed to a roughly $500,000 comp‑time component of the shortfall. The sheriff's representative said comp payouts were historically paid from general personnel lines rather than a separate comp payout line; county staff said they will add clearer comp reporting and consider a distinct budget line for comp payouts.
Members pressed for earlier and more digestible reporting: requests included a dashboard showing year‑to‑date budget vs. spend and quarterly financial reports so the board can spot overruns sooner. Weiss and administration said they will pursue more frequent reporting and implement additional tools; they said the county is moving to ADP for payroll management to improve departmental visibility and recommended policy changes for vacancy budgeting in the 2027 cycle.
Other topics during the finance discussion included encumbrances and roll‑forwards for multi‑year projects (ARPA, CDBG), how special revenue funds carry their own benefit liabilities, and the treatment of bank balances vs. audited fund balances in treasurer reports. Administration noted Moody's interest in fund balances as part of a bond‑rating review and warned changes in liquidity could affect the county's AAA rating.
No final vote on the fund‑balance resolution was recorded in the meeting transcript; staff said several of the resolutions had been reviewed in committee and would be consolidated for board action at a future point. The board moved to executive session later in the meeting for settlement of claims and then adjourned after returning to open session.
Key takeaways: finance staff committed to improved dashboards and quarterly reporting, a review of vacancy budgeting for next year's policy, better tracking and possible budgeting of comp payouts, and implementation of ADP to strengthen payroll visibility.
