{
  "id": "2026-01-13_audit_committee",
  "meeting_date": "2026-01-13",
  "meeting_type": "audit_committee",
  "meeting_types": [
    "audit_committee"
  ],
  "title": "Conroe ISD Board Meeting — January 13, 2026",
  "date_display": "January 13, 2026",
  "type_display": "Audit Committee Meeting",
  "types_display": [
    "Audit Committee Meeting"
  ],
  "item_count": 0,
  "has_agenda": false,
  "has_notes": true,
  "pdf_filename": "agenda_2026-01-13_special.pdf",
  "packet_url": null,
  "generated_at": "2026-06-18T19:45:21.893169Z",
  "highlights": "",
  "sections": [],
  "agenda_breakdown_md": "",
  "meeting_notes_md": "<!-- Generated by clean_summary.py -->\n<!-- Source: meeting_notes_2026-01-13_regular.md -->\n<!-- Generated: 2026-03-28 23:03 UTC -->\n\n\n\n<!-- meeting_type: regular -->\n\n# Conroe ISD Board Meeting — 2026-01-13\n*Audit Committee Meeting — Unofficial Notes*\n*Based on auto-generated transcript. Not an official record.*\n*Generated 2026-03-28 19:27 UTC*\n\n---\n\n# Unofficial Meeting Notes\n## Conroe ISD Audit Committee Meeting\n### January 13, 2026 – Regular Meeting\n\n**Time:** 9:00 AM – 10:19 AM\n\n> **Note:** These are unofficial notes based on an auto-generated transcript. They may contain errors in names, spellings, or details. Official minutes should be consulted for the authoritative record.\n\n---\n\n## 1. Call to Order & Quorum\nThe meeting was called to order at 9:00 AM. A quorum was confirmed, and proper notice was posted in accordance with the Texas Open Meetings Act (Texas Government Code Chapter 551).\n\n## 2. Citizen Participation\nNo citizens signed up to speak.\n\n## 3. Audit Committee Chair Selection\n- **Nomination:** Trustee Dawson was nominated for Audit Committee Chair for 2026.\n- **Second:** Trustee Odenweller\n- **Vote:** Motion carried unanimously. Trustee Dawson assumed the chair for the remainder of the meeting.\n\n---\n\n## 4. Annual Comprehensive Financial Report (ACFR) – Fiscal Year 2025\n\n### Presentation by Sarah Roberts, Weaver (Independent Audit Firm)\n\n**About the Audit Firm:**\n- Weaver, founded in 1950 (Fort Worth), now headquartered in Houston\n- Works with over 300 governmental entities annually, including 50+ Texas school districts\n- Sarah Roberts has served as engagement partner for 7 years; senior manager Britney Drew for ~4 years; engagement supervisor Pia Canella was new in that role this year\n\n**Audit Scope:**\nThe district undergoes a \"single audit\" with two components:\n1. **Financial statement audit** – complying with AICPA generally accepted auditing standards and Government Auditing Standards (\"Yellow Book\")\n2. **Federal awards compliance audit** – under Uniform Guidance (2 CFR 200)\n\nThree reports issued:\n1. Opinion on financial statements\n2. Report on internal controls and compliance (Yellow Book)\n3. Opinion on federal award compliance (Uniform Guidance)\n\n### Audit Results – All Clean\n- **Financial Statements:** Clean, unmodified opinion. No material weaknesses, significant deficiencies, or material non-compliance identified.\n- **Federal Awards:** Clean opinion on compliance. No material weaknesses, significant deficiencies, questioned costs, or other reportable findings.\n\nRoberts emphasized that Weaver actively looks for problems using a risk-based approach and credited the district's business office staff for the clean results, noting their low turnover, professionalism, and attention to detail.\n\n### Key Financial Highlights\n\n**Statement of Net Position (p. 12 of ACFR):**\n- Combined view of all district funds\n- Net position increase of ~$18.7 million (on total assets over $2 billion — reflects consistency/stability)\n- **Unrestricted net position is in deficit** — noted as common for Texas school districts due to required recognition of TRS pension and other post-employment benefit (OPEB) liabilities (~$370 million negative impact). Not a cause for concern.\n\n**General Fund Balance Sheet:**\n- Total fund balance at end of FY2025: **$164 million**\n- Unassigned fund balance: **$155 million**\n- Liquidity ratio (unassigned to total): **94.6%** — identical to prior year\n\n**General Fund Statement of Revenues, Expenditures & Changes in Fund Balance:**\n- Total expenditures FY2025: **$721 million**\n- Net change in fund balance: **approximately negative $1 million** (compared to positive $1.6 million prior year)\n- Ratio of unassigned fund balance to total expenditures: **21.5%** — within the district's stated goal of 20–25%\n\n### Significant Discussion on Fund Balance\n\n**Karen Garza (CFO)** noted:\n- The district's stated goal is to maintain fund balance between 20–25% of expenditures\n- Rating agencies for bond sales would recommend even higher levels\n- Current year budget is $761 million (up from $720M), which will compress the percentage\n- The district is \"nearing the bottom of what we would consider acceptable\" and must be \"very vigilant\"\n\n**Discussion on factors affecting fund balance:**\n- The adopted FY2425 budget projected a $12 million deficit\n- The district received **$17.5 million** from the over-65 homestead exemption correction ($10M for FY23-24, $7.5M for FY24-25), with ongoing annual receipts expected at $7–8 million\n- **$7 million was transferred to the self-funded insurance plan** to make it whole\n- An additional transfer of **$8–10 million** will be needed for the self-funded insurance plan, for a total estimated insurance shortfall of $15–17 million\n- The coincidence between the over-65 correction revenue (~$7–8M/year) and the insurance transfers was noted\n\n**Dr. Vinson** emphasized the importance of fund balance to bond ratings, citing personal experience at a previous district where growing fund balance significantly improved bond ratings with Moody's and Standard & Poor's.\n\n### ACFR Format & Awards\n- The ACFR goes beyond basic TEA reporting requirements (optional comprehensive format)\n- ~90% of school districts lack the capacity to prepare this document internally; Conroe ISD prepares it in-house\n- The district participates in two voluntary review programs: **ASBO** (Association of School Business Officials) and **GFOA** (Government Finance Officers Association)\n- Certificates for FY2024 conformity are included in the introductory section\n\n### Notable Financial Statement Notes\n- Notes 13 & 14 address TRS pension and OPEB liabilities — significant actuarial estimates\n- The pension liability discount rate of 7% is highly sensitive; a 1% change either way would affect the district's statements by **hundreds of millions of dollars**\n\n### Recognition of Finance Staff\nThe following staff were recognized for their work preparing the ACFR:\n- Cyndi Westrup (Director of Finance), Janith Stowers, Desiree Smith, Rachael Batalla, Blair Delahoussaye, and Candice Armstrong\n\nMultiple trustees expressed appreciation for the business office staff.\n\n### Vote\n- **Motion** to recommend the district's 2025 ACFR for approval by the full Board of Trustees at the January 20, 2026 regular meeting.\n- **Vote: Motion carried unanimously.**\n\n---\n\n## 5. Approval of Minutes\n- **Motion** to approve minutes from the September 10, 2025 Audit and Investments Committee meeting.\n- **Vote: Motion carried unanimously.**\n\n---\n\n## 6. Introduction of New Internal Audit Manager – Amy Behrnes\n\nAmy Behrnes introduced herself as the new Internal Audit Manager, joining Conroe ISD in December 2025. Her background includes:\n- 18 years in Texas\n- Primarily at Dell Technologies, with time at Health and Human Services\n- Experience in internal audit, IT audit, and various finance roles\n\n**Recognition of Outgoing Internal Audit Manager Brian Hayden:**\n- Served 7 years with the district\n- Built out the internal audit function to its current state\n- Received a round of applause and expressions of gratitude from the committee\n- Hayden stated this was \"the best job of my life\" and recognized Karen Garza as \"the best boss I've ever had\"\n- Hayden is retiring and planning to travel to Thailand\n\n---\n\n## 7. Internal Audit Plan Status Update – FY 2025-26\n\n### Completed/In-Progress Audits\n\n#### A. Activity Fund Audits\n- 3 of the planned audits complete; remainder to be completed through the year\n- Laura (PTO/activity fund auditor) focuses on PTO matters first half of year, activity funds second half\n- **Forward-looking note:** Discussion about potentially reducing activity fund audit scope to focus on the 4–5 recurring issues found over the past 5 years, and redirecting Laura's time toward higher-value audits. Amy Behrnes will present a revised plan to the committee.\n\n#### B. Vehicle Inventory (White Fleet – Non-Bus Vehicles)\n- **291 vehicles** with book value of ~$3 million\n- **Findings:**\n  - 21 instances of retired vehicles still on fixed asset lists (all fully depreciated; no financial impact)\n  - 15 instances of vehicles listed under incorrect departments (transfers not reported; no financial impact)\n- **Recommendations:** Finance should recommunicate to all departments to report retirements, transfers, and verify VIN numbers\n- **Discussion:** The district is beginning to barcode all vehicles. Trustees asked about vehicle lifecycle policies — the district drives vehicles \"until they don't drive anymore\" rather than using set replacement timelines. Some retired vehicles serve as reserves (\"Old Blue\" at the warehouse was cited as an example).\n- **Trustee Dawson asked** how many district vehicles are driven home by employees (vs. stored at district facilities). Staff committed to providing this information later.\n\n#### C. Police Department Audit\nSix areas reviewed: overtime, training, staffing, evidence process/inventory, general operations, and emergency response.\n\n**Opportunities for Improvement identified:**\n\n1. **Destruction of Evidence – Segregation of Duties:** No dual-control process during evidence destruction. Recommended implementing dual sign-off.\n\n2. **Evidence Destruction Documentation:** No formal destruction log maintained. Recommended implementing a formal log with key details (serial numbers, personnel involved) and ensuring items are only marked \"destroyed\" in the PMI Evidence Track system after destruction occurs.\n\n3. **Evidence Chain of Custody:** 2 inconsistencies found in a sample of 30 evidence items:\n   - One item lacked a written entry on the yellow evidence card for permanent storage placement\n   - One item processed entirely by a single officer (segregation of duties concern)\n   - While 2/30 might not normally trigger a major finding, the high-risk nature of evidence handling warranted the observation\n\n4. **Sexual Assault Kit Storage:** Inconsistently labeled and stored. Recommended written protocols for labeling, storage (including refrigeration requirements), transfer procedures, and documented communication for all evidence handling decisions.\n\n5. **Inventory Management:** Weapons and equipment not consistently tracked; records not centralized; inventories not conducted at defined frequencies. Recommended regular inventories (quarterly or semi-annual) and full integration of Excel-based records into the **LEA (Law Enforcement Asset) equipment management system**.\n\n6. **LEA System Access (Observation – Lower Risk):** Only one person (the support lieutenant, now retired) had access to the LEA system. The department has 6 licenses and needs to grant access to additional personnel.\n\n7. **Safety Briefing Documentation (Observation):** Instructor-led safety briefings for firearm training not documented. Recommended documenting all safety briefings.\n\n**Chief Blake Lock addressed the committee:**\n- Thanked Brian Hayden and the audit team\n- Confirmed all evidence and equipment was accounted for — the issues were documentation-related\n- Stated that **all items identified in the audit report have been corrected as of today**\n\nTrustee Dawson emphasized the importance of these findings given that the district police department handles its own evidence rather than relying on outside agencies.\n\n### Upcoming Audits (Remainder of FY 2025-26)\n\n#### D. Network General Controls (ITGC) – IT Audit\n- Previously conducted ~5 years ago (first time in 13 years at that point); found numerous issues\n- Follow-up a year later still showed some issues\n- New audit timed with new IT leadership taking over\n- Being conducted by Weaver's IT specialist team (same team for 5 years)\n- **Discussion on IT audit frequency:** ITGC audits recommended every 3–4 years, with other IT audits (cybersecurity, application controls) conducted in between years. Cybersecurity is separate from but related to ITGC.\n\n#### E. Software Inventory (Two Phases)\n- **Phase 1:** Survey to all campuses/departments to identify software not already on SSO (not including standard apps like Outlook/Excel or mobile apps). Simultaneously, Weaver conducts a \"network scrape\" to identify all software on the district network. The two results will be cross-referenced for validation.\n- **Phase 2:** Review findings for redundancies, licensing needs, data privacy agreements with vendors, and usage patterns\n- **Timeline:** Approximately 6 weeks for both phases\n\n**Significant Discussion:**\n- **Dr. Vinson** noted the district is transitioning from an **open system to a closed system** with the laptop rollout, meaning staff will no longer be able to independently load software. This will improve inventory control, access control, instructional consistency, and security.\n- **Trustee Dawson** asked about software usage tracking (not just what's installed, but what's actually being used) and redundancy identification — staff confirmed this is a goal of the audit\n- **Trustee Dawson** has been requesting usage and redundancy data for approximately 3 years, along with Trustee Nelson\n- Discussion about whether **mobile applications** could be incorporated into the software audit — Amy Behrnes committed to checking with Weaver on feasibility\n- **Trustee Dawson** referenced that Mr. Lambert mentioned \"Learn Platform\" as a tool that already pulls some usage data\n- Discussion about potential cost savings from identifying unused licenses/subscriptions and consolidating redundant software across campuses\n\n#### F. Child Nutrition Audit\n- Starts January 20\n- Focus: inventory, cash handling at the **10 schools with highest cash volume**\n- Not a comprehensive audit since federal/state agencies conduct their own reviews\n- Previous audit was 4 years ago; staff checked whether schools had gone cashless (they have not)\n\n**Discussion on MyPay/Payment App Fees:**\n- Trustee raised previous concern about a **$3.25 fee** charged each time cash is loaded onto a student's account\n- No reduction has been achieved; the fee is tied to the POS system vendor\n- Changing would require exploring different POS systems\n- Trustees expressed concern about the burden on families who need to make smaller, more frequent payments\n- **Trustee Dawson** stated opposition to going fully cashless, expressing the value of cash literacy and financial awareness\n- Staff committed to following up with child nutrition department on options\n\n#### G. Transportation Audit Follow-Up\n- Follow-up on findings from 2024 transportation audit\n- Amy Behrnes and team will verify that management responses/corrective actions have been implemented\n\n#### H. Band Instrument Inventory\n- High schools: early May\n- Intermediate/junior high and large elementaries: November\n- Conducted every other year by internal audit; in off years, principals are responsible for sign-off\n\n#### I. School Bus Vehicle Audit\n- Planned for summer (when buses aren't in daily use)\n- **Notable:** No school bus audit has been conducted in at least 7 years (the entirety of Mr. Hayden's tenure)\n\n#### J. Planning & Construction (PNC) – Continuous Auditing\n- Beginning February 1\n- Every financial closeout spreadsheet from general contractors will be reviewed as projects approach completion\n- Currently reviewing: **Armstrong, Austin, Birnham Woods, McCullough Track, and Woodforest** (all renovations)\n- **39 total contracts** under the 2023 bond program\n- All PNC projects of $1 million+ must be presented to the committee for final completion before final payment to contractors\n\n**Discussion on Eissler and Campbell:**\n- Substantially complete but contractor still finalizing financial documents; district has requested additional work within the GMP\n- Financial review pending completion of contractor documentation\n\n**Significant Discussion on Third-Party Construction Audits:**\n- Mr. Foster (PNC) noted that financial reviews are sometimes internal, sometimes external\n- Past external reviewers: **Towns and Associates** (Fort Worth) and **Weaver**\n- **The last third-party construction audit was approximately 2018** — meaning no third-party audit has been conducted on the current ~$2 billion bond program (2019 and 2023 bonds)\n- **Trustee Dawson expressed preference** for engaging a **third-party construction expert** to conduct planning and construction audits on large-dollar items, noting the district is spending billions of dollars\n- Discussion about subcontractor-level review, including whether the district verifies subcontractor bid breakdowns vs. only reviewing general contractor summaries — Mr. Foster confirmed the district reviews every subcontract, every change order, all markups, and checks for scope duplication\n- Trustee Dawson cited a specific example from the Timber Mill contract where dumpsters and portable toilets appeared in multiple subcontractor proposals, raising redundancy concerns. Mr. Foster explained this can occur legitimately due to job site size/personnel requirements but confirmed the financial review process catches improper charges\n- Mr. Foster explained the distinction between **general conditions** (temporary items like portable toilets that don't remain) and **cost of work items** (installed/owned assets) — contractors only receive profit markup on cost of work items, not general conditions\n- Closeout documents will be stored centrally and added to the board brief for trustee access\n\n### Next Audit Committee Agenda (May 6, 2026)\nExpected items:\n1. Risk assessment results and Amy Behrnes' proposed FY2026-27 audit plan\n2. Findings from ITGC audit, software inventory, and child nutrition audit\n\n---\n\n## 8. Next Meeting Confirmed\n**Wednesday, May 6, 2026 at 9:00 AM**\n- Committee expressed appreciation for the 9:00 AM time (changed from previous 7:30 AM start)\n\n---\n\n## 9. Adjournment\nMeeting adjourned at **10:19 AM**.\n\n---\n\n## Summary of Key Votes\n\n| Item | Motion | Result |\n|------|--------|--------|\n| Audit Committee Chair – Trustee Dawson | Nominated and seconded | **Carried unanimously** |\n| Recommend FY2025 ACFR to full Board | Moved and seconded | **Carried unanimously** |\n| Approve Sept. 10, 2025 meeting minutes | Moved and seconded | **Carried unanimously** |\n\n---\n\n## ⚑ Items to Watch\n\n- **Fund balance ratio (21.5%)** is near the bottom of the district's 20–25% target range, with a growing budget denominator and additional insurance fund transfers ($8–10M) still needed — a significant financial sustainability concern\n- **No third-party construction audit** has been conducted on the 2019 or 2023 bond programs (~$2 billion combined); Trustee Dawson expressed preference for engaging a third-party construction expert\n- **School bus audit** hasn't been conducted in at least 7 years; planned for summer 2026\n- **Police department audit findings** highlighted systemic documentation and segregation-of-duties gaps in evidence handling; Chief Blake Lock reported all items have been corrected\n- **Self-funded insurance plan shortfall** of $15–17 million total, with an additional $8–10M transfer still needed from the general fund\n- **Software inventory audit** underway — potential for identifying cost savings through redundancy elimination and unused license identification; transition to closed laptop system will improve controls going forward\n- **Child nutrition payment app fees** ($3.25 per cash load) remain unresolved; further investigation committed\n- **ACFR recommended for full Board approval** at January 20, 2026 regular meeting — constituent follow-up opportunity"
}