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We mean everyone, it is 515 on September 3rd, and this is calling to order the Audit Committee of the Alps and Independent School Districts Board of Trustees.

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Our first item is to a reports on the 2025-26 internal audit annual report to the Board of Trustees, everybody you and Ms. Martinez.

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Thank you.

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Good evening.

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Dr. Leverage Board members.

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Dr. Lesk.

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My name is Myra Martinez.

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I'm the chief internal auditor.

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Mr. Kelly.

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Dr. Mesa.

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Welcome to your first audit committee meeting.

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Thank you for joining us tonight.

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And before we begin, I just take a moment to introduce the audit team as here.

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I wanted to introduce the audit team to the new trustees.

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So I'll start with that very quickly.

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The lady here at the end at Elika Rio, she's the internal audit coordinator of the next person next to her is Liz Bara.

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She's the internal audit manager. Julie Franco is our senior auditor. Antonio Lanesa is our IT auditor.

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The only individual missing is Sue Ramirez, but she couldn't be here with us tonight.

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So, and you will get started.

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The first item on the agenda is the internal annual report for fiscal year 2526, which is last year.

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So we're going to be talking about the past year.

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This is our first audit committee meeting for the fiscal year.

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So we are looking backward for now until our next audit committee meeting.

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The annual report provides an overall account of the work in the performance by internal audit for fiscal year.

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2526, which ended on June 30th, the presentation today highlights key information from the annual

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report document that was also included with your packet. So I'm providing just key items

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from that report to include some of the audits that we completed, the engagements that we

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completed as well as meeting some reporting requirements that are outlined in the global internal

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standards. And you'll hear me throughout the presentation refer to these standards. They

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are globally recognized professional standards that establish the requirements and the expectations

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that guide and govern the work that we do at Inter-International Audit and provide a framework

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to ensure that the outcome is the output. The work that we do is quality work that we have consistency

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in the work and then it also provides credibility to our work.

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So I'll cover three main items in the annual report, beginning with those disclosures

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and confirmations required by the GIS, the global internal audit standards.

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I'll also talk about the 25-26 audit plan completion and finally I'll provide some data

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and highlights on the fraud-waste interviews reports for last fiscal year.

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I want to just begin by establishing what internal audit is intended to do.

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Simply put internal audit exists to add value to the district by providing the board and leadership with independent objective assurance advice and insight.

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Through our work, we help strengthen governance, risk management, controls, as well as decision making, which also supports the district and achieving its priorities, strategic priorities and as well as serving public interest.

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All the three conditions that are on the right side of the slide, including independence,

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objectivity, and competency support and ensure that support the work that we do and

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ensure that, again, that the work we do is effective.

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Beginning with organizational independence,

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the internal audit reports both functionally and

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administratively to the board of trustees, that structure is intentional.

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It helps ensure that our work and our conclusions

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what we communicate to the board is not influenced or restricted by management.

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Especially when we select the work that we do the scope and the areas that we audit

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that we're not told to stay away from certain areas intentionally.

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This graphic illustrates eight conditions that support that relationship with the board

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and really prove the independence of the audit department

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beginning at the top of the circle.

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The audit, the board determines and approves

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the internal audit charter, which defines our authority,

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and outlines the scope of our work.

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The audit, the board, annually approves our audit plan.

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The board also determines the budget

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and the resources that are allocated to our department.

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The board receives regular activity reporting

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from internal audit, whether that's through our completed audit reports or through the quarterly

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reports that we provide to the audit committee as well as the full board of trustees.

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Only the board has the authority to appoint or remove the chief internal auditor.

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The Board does the annual evaluation of the chief internal auditor, the Board determines the compensation for the chief internal auditor, and the Board ensures that the auditor has unrestricted access to the Board to ensure we can communicate any significant concerns that occur throughout the district.

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And I'm happy to report to the Board that there were no impairments to independence during fiscal year 24, 25, 25, 26.

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So, yes, of course, do I turn on the microphone?

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Trustee Kelly.

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Thank you.

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Can you just explain, I know what it is.

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Maybe other people know.

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Actually, I don't know.

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What an impairment is.

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What is that?

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Just qualify.

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What an impairment is.

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In impairment to independence.

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That means that when it comes to independence,

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I report directly to the trust to the Board of Trustees.

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So, if there wasn't an independent independence impairment, that means that something got in the way of me being able to report directly to the trustees.

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And examples would be never doctorless, but should a superintendent try to interfere and whether they amend my budget or they try to tell me which audits to take off my plan.

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Or tell me there are certain areas in the district that you cannot audit and in fact we follow through on that.

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So those are the type of impairments that that I would have to report to the board of trustees and that should not occur based on our reporting structure.

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Okay, so moving on to objectivity.

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So independence relates to the placement of internal audit within the organization and objectivity relates to how we perform our work.

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So being objective means approaching our work impartially evaluating the facts and evidence without any bias.

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conflicts of interest, or allowing our judgment to be influenced by others.

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As a department, we've established objectivity requirements, meaning procedures that we put

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in place to try to prevent any again impairments to objectivity.

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And that includes that when we have new employees that may be transferred from other areas

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of the district, they're not allowed to audit areas that they previously oversaw for at least

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12 months.

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Also, auditors are not assigned to leading engagements of areas where they have a family member

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that leads the department or they have a family member that is a critical part of the process that we're

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auditing. So we, again, we don't assign them to lead the engagements. Auditors are also not allowed to

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accept any gifts, benefits or preferential treatment that could either, if, uh, repair or even give the

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impearance that our objectivity has been impaired. We're all required to make balance assessments based

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relevant facts. We also have additional safeguards that we've put in place annually,

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auditors submit an annual conflict of interest disclosure, and this is a little bit different

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than what our procurement does. What we do here is we disclose any family relationships,

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close relationships with other district employees, and these are the disclosures that we use

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in order to make audit engagement assignments. And that's how we ensure that we don't have

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of personal relationships with individuals that are leading the audit.

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We also have what we call engagement objectivity statements, and these are commitments and

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writing from auditors at the beginning of each audit.

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They sign this objectivity statement, where they attest to disclose any actual potential

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or perceived impairments to their objectivity.

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And finally, the if there should be an impairment to objectivity, then we have responsibility

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to report that to the board. As it occurs. And again, in this area, I'm happy to report that there

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were no impairments to objectivity during fiscal year 2526.

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The last factor that's critical to

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having an effective internal audit department is competency. As of June 30, internal audit had

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six of the seven budgeted auditor positions filled. As you can see on the center square,

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The, all of our team has at least 10 years of audit experience or more.

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We also have a broad knowledge of school district operations,

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but at least four of our employees have again more than 10 years of school district experience.

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In addition, professional certifications act credibility to the work that we do.

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A hundred percent of our team have relevant professional certifications.

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those are certifications that are relevant to the audit profession, or in the case of

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TASPO, they are relevant to school district operations.

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Also, we also review individual competencies for auditors during our performance management.

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Our summative review conferences for last fiscal year were completed in June 2026 for all auditors.

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For the benefit of new trustees, I just wanted to add that we do have a plan that we complete on an annual

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business basis. This provides the structure for the work that we do. And I'll talk more about the plan in later meetings.

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But what I wanted to say about our plan is it ensures that our resources are connected to what's most important to the district.

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those areas of high risk or high priority. We do build flexibility into our audit plan to ensure

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that we can be responsive. The audit plan itself is not static. We need to make sure that we're

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constantly evaluating risk and that we're adjusting our plan to reflect the most on high risk and

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impact for risk to the district.

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The audit plan for 2526 was originally approved by the board in April

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of 2025. It included 15 engagements. During the fiscal year, we reassess the plan based on emerging

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risks, changes and operations available resources prior year work requiring completion in other

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matters that we felt required internal audit attention. And as such in May of 2026, we submitted

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a revised audit plan to the board, which increased the engagements from 15 to 21. We also made

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some changes to the plan and adding and removing certain engagements.

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As of June 30, the internal audit department have completed

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19 of those 21 engagements in the plan.

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That represents a completion rate of 90%.

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It's important to know that aside from audit and advisory engagements and corrective action

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plan follow-up reviews, we set aside in our audit plan hours for monitoring the fraud

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and abuse hotline, quality assurance and compliance with the standards, board and audit committee reporting,

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conducting our annual risk assessment, professional development, as well as the data data

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administration of the department.

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So looking at that performance over time, the 90% completion rate

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tied is tied for the highest completion rate achieved during the six year period shown on this slide.

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The 19 completed engagements were also the second highest number completed during that period.

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And I would consider that a pretty good completion rate.

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We had two vacancies, the last quarter of the fiscal year.

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So we were able to achieve a number that was pretty comparable to 2025.

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Again, for the benefit of new trustees, I just want to provide an overview of distinguishing

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between the different types of engagements that we perform and internal audit because they serve

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different purposes and therefore produce different types of results.

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beginning with the left side assurance engagements, assess an area against established criteria,

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as we were talking about it, Dr. Dyssa.

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We, it results in a conclusion about what is wrong, what is right, what's working well,

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and any risk that we identified as part of the audit.

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And these type of engagements include audits, reviews, or investigations.

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In the center, the advisory engagements, these engagements allow us to analyze issues and provide

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advice on insight or insight without assuming management responsibility.

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This is probably the most collaborative type of engagement because it will our standards

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allow us to work with district leadership and administration to define the scope any of the

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objectives of the engagement.

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So they really can produce insightful information for management when we conduct these type

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of engagements.

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And then, finally, we have what we call our corrective action plan, or cap, follow-up

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reviews.

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And these are a really important part of our process, when we complete an audit, we're

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not done.

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When we complete an audit, we report our findings, and at ERISC, after we issue a draft report,

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its management responsibility to develop a corrective action plan.

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The plan outlines activities with timelines and responsible administrators who will be implementing

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the corrective action plan. And the goal of that plan is really to address the findings, but

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also address the root cause or the risk associated with the finding. And the ultimate goal

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is for that issue to not reoccur. So corrective action plans are role and internal audit is to do

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those follow-up reviews. We look for evidence of implementation, but we also look for a

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address those underlying root cause issues so that it won't reoccur.

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This slide provides the list and the mix of engagements, the 21 engagements that we perform

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during the fiscal year.

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This included 12 engagements.

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We completed 10 of those with the exception of those two at the bottom.

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The advisory engagements in our plan, we were able to complete all four of those, and we conducted five

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corrective action plan follow-up. When it comes to the last engagements that were not completed

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the attendance audit in the surplus audit, they were in the field work phase at the end of the fiscal

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year. We rolled those forward to the current fiscal year, 2027, and we've been working on those.

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If you recall earlier this week, you received the report for the attendance audit, so we're

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corrective action plan to finalize that, but definitely we can be done with this during

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quarter one which ends at the end of September.

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We also have an inventory surplus audit and we the goal for that one is to complete it by

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the end of quarter one as well.

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And also want to add that the actual, again, the annual report document includes summaries

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of the results for each of the engagements.

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So I won't go through them individually today, they're there for available for you to read

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review. And instead later in the presentation what I do want to provide is I want to highlight some

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of the broader insights that emerge when we looked across all the work that we did last year.

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So I've talked about corrective action plans. I think this slide was just intended to reinforce

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that independence where district management developed and implement the plan internal audit

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monitors and report.

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Last year we had, as I mentioned, we had four corrective action plans

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that included 40 corrective action plan activities that were under review, 36 of those activities

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were actually do last year for the maintenance cap were not do until the current fiscal year.

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So in considering that, 34 of those activities we found were effectively implemented that

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represents 94 percent of the total activities.

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Again, the maintenance cap remained open at year end, it still had 4 activities scheduled

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for completion during this fiscal year.

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I also wanted to give you a more current picture

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of where we stand with our corrective action response

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because as an auditor,

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I don't get to deliver good news that often.

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So I think this is good news

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because we've had issues with corrective action plans

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and timelines in the past.

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So at a late hand it out, this stock in it.

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So you'll see that we currently have five open corrective action

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plans and they are in different phases of implementation.

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But as you can see, there are no activities that are passed to.

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They're all moved forward very well.

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For example, the maintenance cap at year end had four activities pending.

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Now they're down to two.

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The special ed department with their activity with their cap, they're down to one activity.

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Most of those activities weren't due until later this fall,

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but yet they've closed out already, most of them.

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with, again, with the exception of one.

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The activity funds audit, the department, the financial services department,

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overseen that, they're doing a great job.

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They've been very responsive and they're progressing really well

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with that corrective action plan.

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And then, even the budget overrun cap that was developed in July,

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they were, we've already been able to work with Mr. Bades in his team

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to close that one activity and we're monitoring that one closely.

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So we can see that this area is progressing better

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than it has in many years.

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So I'm really happy to report that.

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Any questions?

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More of a comment.

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I just want to thank Mr. Bates and his team for moving so quickly on that.

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I think the budget over run audit is one of the most important things that's been

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worked on in a long time by internal audit.

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And just to see that progress keeps us very well tuned.

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Well, in tune is to how we're moving forward here, so thank you very much.

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Thank you all. Thank you all. I, as part of our review of these activities, we again, we look for evidence of completion, but we also test for effectiveness.

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So it's really important to note that these activities have been closed and they were effectively implemented.

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So that goes to show that as we're retesting, for example, when we retested levers, we see that the issues that we had in the past were no longer occurring.

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So the purpose of these campus, it's not just to complete the corrective action plans, but there should be measurable improvement in areas where risks were previously identified and we're seeing that.

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So I wanted to just take a step back and talk about rather than to go into the summary, summarize each one of the results from all of our engagements.

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I wanted for today's presentation to provide a just an overview of what we saw across all of our engagements for the year.

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We saw several reoccurring things that emerged that provide broader insight into the areas of risk.

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As well as opportunities for improvement across the district. There are the four items that I've listed on this slide, beginning with monitoring and oversight. Across multiple areas, we found that having a policy and control in place as we were auditing things wasn't enough.

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And a lot of instances what we saw is that there was a need for ongoing supervisory review, reconciliation, for monitoring, and also as well as the need for validation reconciliation between systems.

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Sorry, necessary to ensure that these controls were actually implemented. So that monitoring piece that oversight, there's a lot of work that happens at the campuses, but at central office, I think there's an opportunity to strengthen some of those monitoring controls.

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that we have here. The second one is data integrity and system controls, got ahead of myself

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there, but reliable data affects regulatory reporting. We know decision-making definitely

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accountability and ultimately also board oversight. Several engagements reinforced the need

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for timely monitoring, escalation or action and that was very evident and like the budget

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overrun with you that we did, and it's probably,

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that's probably the clearest example of that.

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So again, it's very important that,

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that, as we, that, something stuck,

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so that we're reinforcing the need for data integrity

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and validation, including between systems.

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Sometimes we see that our ERP system frontline

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doesn't always match what we've reported to the state.

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And part of that is also monitoring, but really to make sure that somebody's really responsible for ensuring that we have integrity in our data and that we have good good controls in our systems so that when we go from one to the next that the data that we're reporting is still accurate and we're not leaving out any data or that we're not changing the data as it's reported to the state.

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And then finally, accountability, timely action.

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We talked about that.

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The budget over on report is a review as another good example of that.

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Making sure that if conditions change, that we're reporting and escalating things timely.

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And making sure that the superintendent and the board is aware of information they need in order

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to make changes or make important decisions.

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And then finally, sustainable improvement.

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The goal is not to simply correct an individual error.

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It's really to ensure that strong corrective action plan addresses the underlying process,

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so the issue does not recur.

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And that's really the goal of our corrective action plans.

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But again, through those, we want to see that the action plans are working,

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and it's not just a checklist approach.

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And at the last thing I'm reporting on today is a fraud way to use hotline.

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Mr. Kelly, you were asking about this earlier.

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So you see just for background, the district hires third party vendor Navix, who does all the intake for hotland reports, individuals, the public or employees can report those through a phone call or through the website, Navix takes does the intake for all of these reports and then those are sent directly to internal audit.

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Navix's role is really important because it allows employees, or should give employees some sort of assurance that

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these are, they can truly remain anonymous if they wish to do that.

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No one in the district is looking to see where that report came from.

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When it does come to internal audit, that information isn't on there.

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What we're able to see if it is or able to do if it's anonymous is through the

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information from the district as we're following up on any concerns.

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So again, internal audit overseas, the Farways and Abuse hotline.

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We review all reports that are received.

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We coordinate appropriate follow-up.

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Sometimes that means sending it to management for follow-up.

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And that means sometimes we investigate, depending on the concern itself.

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We also track all concerns through resolution to make sure that all hotline reports get

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addressed.

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And then we provide this report, when it's significant issues, I provide those reports

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to some of those concerns to Dr. Lesk when we meet during our monthly meetings.

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And then to the board, I provide them on an annual basis, unless it's something that's significant

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and then at that point I would escalate.

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As you can see, the trend since 2023, the number of hotline reports has decreased.

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Just last year alone, we decreased the count of the reports decreased by 11%.

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and then this just provides a dashboard of the overall hotline reports. We received 75, 7 of those were duplicate concerns that had already been submitted.

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They were for 31 distinct district locations. 91% of the reports were anonymous as you can see.

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The largest count came from employee relations. A lot of those were concerns with their supervisor, concerns with other people. So, most of those are sent to district management to address.

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You also see in the center box the outcome of the follow up on those concerns. Most of them 29 of those were not substantiated in only in only seven of those were substantiated.

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I also want to clarify that the ones that were substantiated, none were fraud related.

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So we do get concerns through the hotline that are not fraud-waste in abuse, but again,

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it's a great reporting mechanism for fraud.

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The association of certified fraud examers, examiners determine that the number one way to detect fraud

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is through hotlines or through anonymous reporting.

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And so having a hotline is really important to our fraught awareness and fraud prevention efforts.

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And then I also summarize the reports by location type and it's pretty even across the

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different elementary schools, pre case secondary and then departments.

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And that's all I have, I'll take any questions if you have any.

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Trustee Quarra.

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Thank you, Ms. Martinez.

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Can you go back to the prior slide?

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Yes.

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I want their legal. Okay, difference between not substantiated and

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absolved. Yes, there's a difference. So absolved means that whatever it was

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reported occurred, but it wasn't a violation or noncompliance with

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distraplion. Violation of law or noncompliance with distraplacy. Okay, and then

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for partially substantiated, is there follow up on that to see like if it's

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to be basically placed in a different category, or is it just deemed closed out at that point?

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I think at that point, when we finish any reviews whether it's internal management,

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they've gotten as far as they could. Partially substantiated means,

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okay, we were able to prove some of the concerns, but not all of them.

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And at that point, yes, the issue is closed.

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And there's also instances where there's insufficient information, and even with the ability to

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post the messages and communicate through navics through the system, we still sometimes

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don't get any follow-up, so if there's insufficient facts, we do report it to the appropriate

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department, but at that point we'll close it on this additional information is provided, and

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we can consider reopening at that point.

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Okay, I just want to say thank you all again and your team and just to kind of stress the fact that I know

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You know, those people that are watching out in the public and just kind of don't understand the background

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I think of your position and everybody else is it's important to have that independence right so that you're only answering to the board and not anybody else within the district

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But but I can honestly say I can speak for myself in the sense of you know Ms. Martinez and her team always being on top of it and always

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At least putting myself right in tune as to what's happening with the district and I think that's probably going to be echoed amongst all the entire board up here.

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So, truly thank you all so much for all the work you do.

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Appreciate it.

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Thank you.

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I appreciate it.

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Any other questions from trustees?

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Well, thank you so much.

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Thank you.

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Let's move on to.

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To have one more report.

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Two.

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Sorry.

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You're working.

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You're working.

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You're working.

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So the next report is, it sounds weird, but it's on internal audit reporting to the board of trustees.

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So the reason we go over this every year at the beginning of the year is just to set expectations for me.

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This is what I believe is important to communicate to the board.

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And this is the frequency that I'm recommending we report these various topics to the board.

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Again, we always align our work to the professional standards.

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And really what the professional standards state is that I need to provide the board, the information you need for proper oversight of internal audit,

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as well as things are important for you to know as a trustee, just in general of the oversight of the organization, the district.

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Board policy, CFC exhibit, is the internal audit charter, as I mentioned.

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It's a key document because this is the document that the board approves, which outlines

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the authority of the internal audit department, the expectations of what we can do in the

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work that we do.

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It also outlines expectations of what I will report to you periodically.

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As you can see, it's more than just the audit plan, it's our mandate, it's our budget

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and our resources.

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It's what I've reported today on independence and other disclosures that are required by the standards.

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It's about our quality assurance and improvement program. And that, I'll talk about it more next during our next meeting.

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But we, as auditors, get audited to, so that's important to point out, so people that we audit, we go through the same thing as well.

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We also report significant risk as they arise. So all of these things is what we've established through the years of what internal audit should be communicating

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to the board, and of course the results of on engagements.

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The audit committee has a huge role in this because a lot of this information is communicated

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through you first during our audit committee meetings, and then subsequently it's reported

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to the full board.

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But the role of the audit committee is very important.

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The oversight of internal audit stays with the full board.

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So even if you're not a member of the audit committee, it is important for you to have the

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information you need to properly oversee this department.

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And this is our reporting and meeting schedule.

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We typically meet with the audit committee on a quarterly basis.

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I know this is August, but this is technically last year, so you'll see it.

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It's where we do the annual report at the bottom.

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But our first quarter is really in October, and then we do January and April, and you'll

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see the activity that's covered through those different meetings.

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We provide the audit committee with this presentation and report and then it is also provided to the trustees no later than a month after we meet with the audit committee and then the content of the reports varies so this is what I've summarized here is by category and turn on a communication planning performance staffing and it mayors or it's supposed to it's it's it's a line to what's required in policy and here it tells you where we can where

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how we communicate to the board during which quarter.

382
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Some of course are as needed.

383
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We don't need a wait for an audit committee meeting

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if it's something so important and important

385
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and high risk, we need a communicated as it arises.

386
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I do have a correction under planning and performance

387
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of first bullet point, I need an audit plan.

388
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That's supposed to be quarter three, not quarter two.

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So again, I wanted just to open to come to you

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and I know maybe for new trustees.

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This is new, but other trustees,

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if there's something else that you want the internal audit department to bring to you during

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our quarterly meetings or even in the reports that we provide to the board as part of the regular board meeting agenda.

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And if you'd back from trustees on that, one thing that has come up has been

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just basically a discussion of, I think it's true, man, we've had a discussion regarding

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you're a review of a new evaluation and I just wanted to note that we are considering

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strongly moving into September to avoid the tumultuous August for being. So we will

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be bringing that forward as soon as possible and just as with Dr. Lusk, Ms. Martinez

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is held accountable to record the board as she said and so that evaluation is very

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important, you know, looking at these standards and looking at what is contained in these quarterly

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meetings and these reports. Beyond that, I just wanted to say that this is really just

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about helping us hold the district accountable to the public. And it has been consistently

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impressed with the work of this team and their ability to move very quickly and to deliver

404
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a very strong guidance for the administration, and I've been very impressed with this administration's

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responsiveness and willingness to implement corrective action plans with fidelity.

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And that's not always been the case with an EPSD, so this to me really represents a great collaboration, a great partnership.

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And I think if all three parties are on their toes, we really will not just save money, but deliver a much better experience for our students and our educators.

408
00:34:13,500 --> 00:34:18,980
so with that I just want to say thank you very much. Is there anything else that I want to

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cut you out? Thank you so much for all of you being here. That's all I have on the evaluation.

410
00:34:25,760 --> 00:34:29,580
Yes, we have that discussion. It will require a change in board policy. Yes.

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So I'll work with legal on that and hopefully we can bring it within the next couple of months.

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Bringing to us will consider it and we'll go from there. Thank you all once again and I encourage

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new trustees, anything you need from this Martinez, please reach out, audit is a very interesting

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as rewarding rabbit hole to go down. So rest assured, you're in good hands with this team.

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So thank you all very much once again. And with that, item three, adjournment at 550 p.m.

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Thank you all very much. Under 45 minutes. Bravo.