Conroe ISD Board Meeting — 2025-01-16

Regular Meeting — Unofficial Notes

Based on auto-generated transcript. Not an official record.

Generated 2026-03-28 17:52 UTC

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Unofficial Meeting Notes

Conroe Independent School District – Audit Committee Meeting

January 16, 2025 | Regular Meeting

Note: These are unofficial notes based on an auto-generated transcript and may contain errors or omissions. Please refer to official board minutes for the authoritative record.

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Meeting Called to Order

• Time: 7:34 a.m.
• A quorum was confirmed present.

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Item 1: Citizen Participation

• No members of the public registered to speak.

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Item 2: Nomination and Selection of Audit Committee Chair for 2025

• Trustee Dungan was nominated as Audit Committee Chair for 2025.
• A second was received.
• Vote: Approved unanimously (lighthearted exchange noted — Trustee Dungan briefly appeared hesitant but accepted).

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Item 3: Annual Comprehensive Financial Report (ACFR) — Fiscal Year 2024

Presentation by CFO Karen Garza and Sarah Roberts, Partner, Weaver LLP

Staff Recognition:

CFO Karen Garza recognized the finance team for their extensive work on the ACFR, including:

• Wes (Director of Finance)
• Janice Sters and Desiree Smith (Assistant Directors)
• Rachel Battalia (Senior Accountant)
• Blair DeHaas and Candace Armstrong (Staff Accountants)

Garza noted the ACFR is prepared in-house, which is uncommon — only a handful of the 40+ school districts Weaver audits do so.

About Weaver LLP

• Founded 1950 in Fort Worth; headquartered in Houston
• Ranked #31–32 nationally among accounting firms
• Works with 50+ Texas school districts; 40+ as audit clients
• Serves 6 of the 10 largest school districts in Texas
• Has been Conroe ISD's external auditor since fiscal year 2008 (~16 years)
• Core value: "Act with Integrity no matter what"

Core Audit Team for Conroe ISD:

• Sarah Roberts – Engagement Partner (since 2017)
• Laura Lambert – Quality Control Partner (Partner in Charge, National Audit & Advisory)
• Brittney Drew – Senior Manager (since 2022)
• Katie Miller – Engagement Supervisor (since 2020)
• Jacob Meckler – Engagement Associate (first year)
• Subject matter resources from IT consulting and data analytics teams

Audit Standards and Scope

The audit is a single audit with two components:

1. Financial Statement Audit – performed under GAAS and GAGAS (Yellow Book standards)

2. Federal Awards Compliance Audit – performed under the Uniform Guidance (Single Audit Act)

Three required reports are issued covering: (1) opinion on financial statements, (2) Yellow Book report on internal controls/compliance, and (3) federal awards compliance report.

Audit Results — All Clean

Financial Statements:

• Unmodified (clean) opinion issued — the highest level of assurance
• No material weaknesses or significant deficiencies in internal controls identified
• No non-compliance material to financial statements identified
• No misstatements identified (material or otherwise)

Federal Awards:

• Unmodified (clean) opinion on compliance for major programs
• No material weaknesses or significant deficiencies in internal controls over compliance
• No findings of fraud, questioned costs, or other reportable items
• Major program tested: Child Nutrition Program ($22 million; ~32% of $68 million total federal expenditures)

Auditor Independence: Confirmed — Weaver complied with all Yellow Book/GAGAS requirements.

Roberts noted positively: "The fact that I'm standing here going through all of these items and have basically no findings to give you I think really is a testament to [the finance team's] level of professionalism."

Financial Statement Highlights

Statement of Net Position (Government-Wide, p. 12):

• Net position increased by approximately $2.8 million year-over-year
• Unrestricted net position shows a deficit of ~$132 million — Roberts explained this is very common (49 of 50 districts sampled had this deficit) due to required recognition of TRS net pension liability (~$274 million) and net OPEB liability (~$111 million)
• Backing out pension/OPEB liabilities, the district would be positive ~$300 million

General Fund Balance Sheet (p. 14):

• Total fund balance: ~$165 million (up from $163.5M prior year)
• Unassigned fund balance: ~$156 million (~95% of total, consistent with 94% prior year)

General Fund Revenues/Expenditures (p. 18):

• Total expenditures: $710 million (up from $650M prior year; increase primarily from payroll growth — increased FTEs and raises)
• Net change in fund balance: +$1.6 million (compared to -$18.8M prior year)
• Major swing factor: $18.8 million transfer in from capital projects fund to general fund (return of previously set-aside capital maintenance funds no longer needed due to bond issuance)

Key Ratio — Unassigned Fund Balance to Total Expenditures:

• FY2024: 22.0% (FY2023: 23.6%)
• Represents approximately 2–2.5 months of operating expenditures
• Roberts confirmed this is on par with typical Texas school districts and represents a healthy financial position
• Significant board discussion: Trustee Dungan specifically asked about this ratio for public awareness, noting constituents frequently ask why the district maintains this level of reserves. Roberts confirmed it functions as an emergency/savings fund, is important for bond ratings, and districts need adequate cushion for contingencies (hurricanes, pandemics, etc.). She noted you don't want it too high (sitting on money) or too low (risky position).

Significant Accounting Estimates:

• TRS pension and OPEB liabilities are the most significant estimates
• Highly sensitive to actuarial assumptions (mortality rates, retirement rates, healthcare cost trends, discount rates)
• Pension liability sensitivity example (p. 52): at current 7% discount rate, the liability could range from $161M to $410M with just a 1% change

ACFR Voluntary Programs

• District participates in both GFOA (Government Finance Officers Association) and ASBO (Association of School Business Officials) voluntary enhanced reporting programs
• District received awards for FY2023 and is expected to receive them for FY2024
• Only ~30–40% of Texas school districts participate
• Adds introductory section, statistical section (10-year trends), and subjects the report to two additional external reviews

Vote on Item 3

• Motion to recommend approval of the FY2024 ACFR to the full Board of Trustees at the next regular board meeting.
• Vote: Approved unanimously.

Note: The full board meeting is scheduled for Tuesday but may be rescheduled due to weather concerns. The ACFR must be submitted to TEA by January 28, 2025.

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Item 4: Approval of Minutes — September 10, 2024 Audit and Investments Committee Meeting

• Motion to approve.
• Vote: Approved unanimously.

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Item 5: Status Update on 2024–2025 Internal Audit Plan

Presented by Brian Hayden, Manager of Internal Audit

Internal Audit Overview:

• Hayden has served as Manager of Internal Audit for 5.5 years
• Linda Doran serves as Staff Auditor (handles PTO support and activity fund audits)
• Department performs operational and financial audits
• Co-source arrangement with Weaver (since 2020): Eliminated need for admin support position; brought construction audits in-house (previously outsourced at significant cost); provides IT expertise, audit support, and subject matter experts
• Senior auditor from Weaver (Daz Thomas) has been assigned for two years, providing continuity

Historical Context (provided by district leadership):

• Prior to ~5 years ago, internal audit was almost exclusively focused on activity fund audits
• The shift to department-level risk-based auditing (procurement, transportation, IT, etc.) began approximately 5 years ago
• Construction audits were brought in-house in 2020 (last external construction audit was Grand Oaks High School — no findings; external audits were very expensive)

Audit Plan Structure:

• Risk assessment distributed annually to senior management and audit committee members
• ~4–5 year rotation cycle for major audit areas
• Findings drive more frequent follow-up (next year)
• Audit plan presented and approved by committee each May
• Committee members can request specific audit areas
• Typical audit takes ~6 weeks; follow-ups ~3 weeks

Committee members requested:

• Copy of the risk assessment spreadsheet
• Multi-year audit schedule/calendar
• Prior department-level audit reports for new members

Activity Fund Audits (2024–25)

• Three completed so far (Reaves Elementary, Milam Elementary, Runyan Elementary)
• Focus this year on elementary schools (previously heavier on high schools)
• Selection based on: (1) longest time since last audit, (2) prior findings
• District changed from trigger-based audits (principal/secretary changes) to regular rotation
• Common mistakes addressed through ongoing principal training
• Scope: Cash controls, bank reconciliations, cash receipts, cash disbursements, fundraisers

PTO Support (Clarification):

• PTOs operate under Conroe ISD's 501(c)(3) umbrella ("Conroe ISD Educational Support Group") for tax exemption purposes only
• District does not audit PTO funds
• Support limited to: paperwork assistance, tax guidance, and tax seminars
• Saves each organization ~$600/year in filing fees
• When asked about risk exposure, Hayden indicated he does not believe the district is at risk

Completed Audit: Procurement (September 2024)

Opportunities for Improvement (higher risk, require management response):

1. Purchasing does not track vendor modifications

2. No established process to routinely evaluate vendors

3. No clear procedures for preparing/approving cost-price analysis for federal requirements (2 CFR 200)

Observations (lower risk):

• Campuses sometimes receive goods meant for the warehouse without notifying the warehouse
• Obsolete inventory valued at $116,856 (4,600 items) creating financial and storage issues

Management Response (presented by new Purchasing Director, appointed May 2024):

• Vendor modification tracking: Discovered an existing on-demand report in e-Finance system; staff now trained on its use
• Vendor evaluation: Google form was tied to former director's email and became non-functional; now restored on internal website
• Federal cost-price analysis: Protocol established and added to procedures manual
• New leadership noted as a good opportunity to restructure processes

Completed Audit: Transportation

Opportunities for Improvement:

1. Security at transportation centers needed review (details reserved for closed session)

2. Driver credentials (CDLs, physicals, certifications) not adequately tracked or updated in a timely manner — still using paper-based system

Observations:

• Segregation of duties issue for fuel recording (same person ordering and reconciling)
• Pro-key/fob reprogramming not adequately tracked
• Loaner tablets not tracked for checkout/return

Management Response (presented by Juan Melindes, Transportation):

• Obsolete parts identified, palletized, and scheduled for auction in February; freed up space for securing expensive parts
• Credential clarification: No employee had expired credentials; issue was lack of centralized electronic storage. LaserFiche system implementation beginning January 24 to create electronic folders for all employees
• Fuel ordering and reconciliation duties now separated; monthly monitoring in place
• Key reprogramming now monitored monthly by fleet manager and payroll manager
• Loaner tablet checkout/return process now established at each center
• Parts inventory: Electronic records being kept; exploring new software to replace outdated system (described as "operating off Atari" compared to current standards)

Committee noted the credential tracking finding as "a little alarming" regarding potential liability.

Completed Audit: Band Instruments — Significant Success Story

Presented by Brian Hayden and Dr. Horton (Fine Arts)

Historical Trend:

| Year | Missing Instruments | Value |

|------|-------------------|-------|

| 2020 (first audit) | 153 | ~$440,000 |

| Subsequent audits | Declining | Declining |

| 2024 | 2 | ~$2,800 |

Key improvements that drove results:

• New standardized software system (replaced sunsetted system) with real-time access for Fine Arts office, internal audit, and staff
• Biennial physical inventory by Internal Audit and Fine Arts (visiting 46 classrooms for junior high band/orchestra in November)
• On alternate years, band directors conduct inventory with principal sign-off
• Standardized checkout procedures with parent responsibility forms
• Instrument condition evaluated at checkout and during inventory
• Instruments assessed for repair vs. replacement cost-effectiveness
• Eliminated inconsistent Excel-based tracking

The 2 remaining missing instruments were carried over from before the audit process began (~5 years missing) and have been removed from inventory.

Dr. Horton noted the process also helps with capital outlay decisions — understanding what the district actually has prevents purchasing duplicates.

In-Progress Audits (2024–25)

1. HR Recruitment and Retention Audit

• Currently underway with Weaver subject matter expert support
• Scope: Recruitment, branding, onboarding, attrition, compliance, and performance metrics
• Results to be reported at May audit committee meeting

2. IT Application Security and Controls Audit

• Kicks off first/second week of February
• Focus: Security and controls around district applications/software (primarily business systems)
• Scope: Inventory of applications, access controls, who has access and how they get it
• Follows prior years' IT audits (IT General Controls, Cyber Security Risk Assessment)
• Annual IT audit now standard practice
• Note: District leadership (Dr. Lambert) clarified this is separate from an ongoing instructional technology effort to inventory all apps for usage evaluation, overlap identification, and cost-effectiveness
• District implementing "Learn Platform" software to track app usage across campuses
• Committee members expressed strong interest in receiving a full list of all applications/software when available
• Discussion about student data privacy — a prior gap was identified where an app allowed outside individuals to see student activity; it was shut down
• New head of network services noted as a factor likely to increase IT risk ranking in next assessment

3. Chromebook Inventory Audit

• First-ever Chromebook inventory audit
• Will sample one high school and one junior high per feeder zone
• Will assess tracking mechanisms, processes, and controls
• Committee member asked about applying successful band instrument protocols to Chromebooks; Hayden noted they need to first understand current controls before making recommendations

4. Construction Audit

• Typically conducted ~March when a project nears completion
• Deep financial audit: change orders, retainage, CM payments, financial reconciliation

Upcoming Audit Cycle (2025–26 Preview)

• Police Department and Child Nutrition already identified as likely next in rotation
• Risk assessment to be distributed to committee members ~March
• Proposed plan to be presented for approval at May audit committee meeting
• IT audit will continue annually
• Follow-up audits on Procurement and Transportation findings expected ~October 2025

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Item 6: Next Meeting Date Confirmed

• Next Audit Committee Meeting: Wednesday, May 7, 2025 at 7:30 a.m.
• Confirmed by all members present.

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Adjournment

• Motion to adjourn.
• Vote: Approved unanimously.

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These unofficial notes were prepared from an auto-generated transcript and are intended to help the public understand what occurred during the meeting. They are not official minutes of the Conroe ISD Board of Trustees or its committees.