Regular Meeting

Hey.

Heat. call to order the February 5th meeting of the Kerry Town Council. And at this time, I'll recognize Mayor Pro Tim Bush, who will lead our ceremonial opening.

Thank you, Mayor. Uh, good evening, everyone. Before we begin tonight's meeting, I wanted to take a moment to recognize and thank the large number of remarkable teams that have worked tirelessly behind the scenes during over the past few weeks. Our public works, our public safety, our communications professionals. They really are the heartbeat of this town. And through snow and ice and freezing temperatures, you kept Carrie running. You kept us connected and you kept us safe. Now, the numbers tell an extraordinary story, and I thought I would share it with um all of our residents that over 20 days, our teams logged more than 41,500 miles. That's one and a half times

around the world. Um and spread over,00 tons of salt using 75 plows, 28 spreaders, and 200 steel blades. I actually got to see one of those blades broken. They prepared 90,000 gallons of brine. And if you want to know how much that is, that is about six standardsiz backyard pools worth of brine. And they worked 18,500 hours across 16 separate 12hour shifts. Um, there were over 400 staff members from every department and the communications team kept the public informed through 225 updates on all types of social media from Facebook, Next Door, Instagram X, Blue Sky, and the Carrie Collects app. Um, these netted over two million impressions by people watching live about what was going on in Carrie. Um, it was an incredibly helpful and informational and safe set of reminders that were provided to us. And there were live interviews by many of our staff. And there were over 10,000 views on our live traffic cameras. But thanks to everyone's efforts and the community's caution, we only saw a small number of weather related emergencies. We had about over those 20 days, we had about 30 calls to 311 and just a dozen really true emergencies. Among those were eight traffic accidents, two with injuries, and three accidents that involved stranded motorists. One call, however, stands out though as a very powerful reminder of both the human courage and the importance of safety. During the second storm, a young child ventured out into a frozen pond that gave way beneath him. But fortunately, a nearby, I will say hero saw what happened and ran to

help. And together, they were actually rescued by our incredible team from Fire Station 5, even though that they ended up in the frozen water for more than five minutes. It reminds us that no ice is safe ice and every second counts in an emergency. And though sadly there was another event where we learned of the loss of a family pet, a dog who fell through the ice at another neighborhood pond. And though this one occurred outside of our active snow response, it is a reminder for all of us that we need to stay vigilant. We need to check on our neighbors and be mindful that this winter season is still lingering on and on and on. So to every member of the town staff who answered the call um of duty and to every resident who helped whether you helped a neighbor where whether you stayed at home like you were supposed to, you all really showed resilience um professionalism and heart and you really are the true spirit of Carrie. So with that, if you will join me in the pledge of allegiance. I pledge algiance to the flag of the United States of America and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all.

Thank you.

Thank you for all that data. I love data.

I know you do. You should post this and we'll share. I will.

Okay. We've received a request to include a proclamation presentation in celebration of Ramadan. Is there a motion to amend the agenda accordingly?

So moved.

Second.

There's a motion and a second. Discussion. All in favor, please say I.

I. Oppose. Motion carries unanimously.

We're now at recognitions, reports, and presentations.

And we have Troop 213 working on their citizenship in community badge. if you would stand and be recognized, please.

Thank you. We appreciate you being here and for your interest in local government. All right. Our first proclamation this evening is the Lunar New Year Proclamation. And now I now invite Council Member Hang to join her invited guest at the podium for the presentation. Yeah. So, I just changed to wear a Chinese traditional clothing to invite Bing, Mr. Lee to join me over. Uh before I read this uh proclamation, I would love to recognize the North Carolina Chinese American Society members over there. Could you please stand up? See, we are we are going to celebrate Luna New Year tomorrow and they prepare the red envelope for everyone. So this so everyone of us get an envelope and there's a golden chocolate inside.

So uh uh and also to the audience if you you can just grab a red envelope after the meeting. Okay, please stay. Thank you. And you stand here.

Okay.

Celebrating the Luna New Year in Kerry, North Carolina. Whereas Kerry celebrates the rich cultural history and diversity of our citizens through recognizing important and significant holidays including the Luna New Year. Whereas the Luna New Year, also known as the spring festival, is a memorable holiday filled with joy, festival traditions, family reunions, thanksgiving, and reflection, is the most significant celebration for

many communities around the world. Whereas the Luna New Year, also known as the spring festival, marks the transition from one zodiac animal to the next. with February 16 marking the end of the year of the snake and the February 17 marking the beginning of the year of the horse. Whereas in Chinese culture the horse is a symbol of strength, vitality, perseverance and freedom representing energy, resilience, optimism and the spirit of progress and determination. Whereas Muveni Foundation, North Carolina Asian-Americans Alliance, and the North Carolina ChineseAmerican Society host a vibrant celebrations and cultural traditions for local communities to come together to appreciate the heritage of the Luna New Year. Now therefore, I Bella Huang, council member of Kerry, North Carolina, on behalf of the Kerry Mayor and Council, wish good fortune, health, and happiness to all those who celebrate this joyous new year. Proclaim this 5th of the 5th day of February, 2026. Thank you so much and happy Lunar New Year.

Happy Lunar New Year.

Our second proclamation is the Ramadan proclamation and I will now invite Council Member Bonsel to join Mr. Williams at the podium for the presentation.

As we gather today, I want to take a moment to recognize the holy month of Ramadan, a time observed by Muslims around the world as a period of fasting, reflection, prayer, and service. Ramadan is a reminder of the values we all share. Compassion, gratitude, self-discipline, and care for our neighbors. It is also a time that brings families and communities together in the spirit of generosity and understanding with that it is my honor today to read this proclamation recognizing Ramadan and its significance in our community. Whereas Ramadan is the ninth month of the Islamic lunar calendar and is considered one of the holiest months for over 1.9 billion Muslims worldwide including members of the Muslim community in Kerry. And whereas Ramadan is a time of spiritual reflection, self-discipline and acts of kindness during which Muslims fast from dawn to sunset, abstaining from food, drink and other physical needs to cultivate gratitude, empathy and connection with others. And whereas the practice of Ramadan emphasizes the values of compassion, generosity and community with Muslims coming together to break their fast at sunset during ifar and uniting in worship and prayers. And whereas Ramadan fosters great greater understanding and mutual respect among people of all faiths and cultural backgrounds, contributing to the rich diversity and inclusiveness that defines Kerry. And whereas Kerry values the contributions

of the Muslim community to our shared prosperity, cultural vibrancy, and civic life, recognizing that our diversity is a strength. Now therefore, I Sera Bansal, Kerry Council member, on behalf of our mayor and Kerry Council, do hereby recognize February 17th through March 19, 2026 as Ramadan in Kerry, North Carolina and encourage citizens to learn more about this important month. Join in building bridges of understanding across all faiths and appreciate the reflection, kindness, and unity embodies in Ramadan. Proclaim this fifth day of February 2026. So, good evening. Thank you so much uh to the mayor, uh the council members, and uh council member Bouncel for your leadership. This means a lot to the Muslim community as we continue to move forward to try to unite as a human family. Thank you.

Thank you.

All right, we're going to move into the business portion of our meeting now. And we're at our next item, which is the 2025 annual comprehensive financial report, independent audit results, and the presentation of the annual financial results update. So, at this time, I'm going to recognize interim town manager Russ Overton to introduce the item. Thank you, Mayor. Um, I've got a slide clicker for me.

Thank you. All right. I thought it would be good to introduce kind of where we're at as we get receive the uh findings from our audit tonight is that there are four different investigations or inquiries that are going on during this transitional time. Uh a as everyone knows the first one would be the North Carolina Office of the State Auditor is investigating alleged cases of fraud, waste, and abuse of taxpayer dollars happening independent of anything uh we are doing. One thing that the council has done is hired Wan uh Womble Bond Dickinson to examine uh procurement card usage, reimbursement expenditures of the town funds by the former town manager, examination of the former town manager's reporting of town finances, and review a work environment created by the former town manager. And we would expect that report in uh in the coming months. The district attorney has also called for an investigation by the uh North Carolina SBI to perform a criminal investigation. And tonight to highlight what you're receiving is Cherry Beckard is Car's external independent auditor that reviews financial statements for financial reporting and compliance related to federal funds and internal controls uh for for the fiscal year 2025. I guess it's good to point out that they are looking back at the last fiscal year. um while the state auditor, womble bond and anything else are looking at a multi-year effort. So um earlier today I had the privilege of uh meeting Leanne Waters with Cherry Beckard and she will be up later to talk about what our uh external independent auditor's review has been. I think this slide's very important because all of this can be kind of confusing especially when you're hearing of what our uh independent external audit auditor does. So I wanted to walk take a moment to walk through the slide of how you get to an annual um audit. Um staff at the close of a of a fiscal year staff creates draft financial statements. They then give those to the auditor to come in and audit those

statements. The auditor then shares their opinion with the town council and that'll be tonight. And then that information goes into something called the annual comprehensive financial report or the acter that is uh ultimately shared with the public and I believe currently it will go online where there are also uh I believe the prior six years of that document currently online as well. So also earlier tonight um our finance director Kimberly Branch walked through the draft acter and then after you received your report tonight and as they finalize that work the auditor's opinion will be added to that. So with that I'm going to uh turn it over to assistant town manager Dana Whidmar for a few opening statements as well.

Good evening Mayor and council. I'm pleased to be here tonight as part of a team sharing important information regarding K's fiscal year 2025 independent external audit and year-end financial statements. Collectively, this information reports on financial accountability and performance. Please note this information is specifically for fiscal year 25 only. So that was July 1st, 2024 through June 30th, 2025. I'll go straight to the headline. The auditor anticipates issuing an unmodified opinion, often referred to as clean, which is the highest possible designation. And the financial results for the year include very good news. So, I'd like to share some things that can help explain the contradiction between tonight's report and the recent negative attention on Carrie. To adequately explain the positive financial results you're about to hear, we need to go back to the spring of 2024

when finance staff raised concerns about fisc year 24 performance. In response to those concerns, action was actions were taken by staff and council in the spring of 2024 to ensure that Car's performance met the fund balance policy that year. Then in fiscal year 25, Kerry staff closely monitored financial performance, including revenue growth and net position, while also taking comprehensive action on capital projects due to inflationary pressures. Tonight's financial result results reflect the many actions taken towards the end of fiscal year 24 and throughout fiscal year 25. And of note from the perspective of the auditor, car's financial department, finance department has processed countless transactions throughout the year in a new financial system that Cherry Beckard is is able to obtain audit EV evidence supporting the issuance of this unmodified opinion. What these results do not answer are the many questions raised by the media and our citizens. So, as staff continues to respond to the many inquiries, we are learning something very simple. Car's former town manager shared incomplete information and/or different information with different people. For example, when staff raised concerns related to performance in the spring of 2024, we were given the impression that you council were told everything. We now know that you did not know the full truth because you were not told.

This key contradiction of incomplete information provided by the former town manager contradicts our value of transparency and consequently undermines trust. That reality, our reality has been very difficult and as you highlighted, Mayor, very sad, but it led council to do the hard work they were elected to do, that you were elected to do, which involved a change in leadership. It also included a call in the fall of 2025 from the mayor to K's independent auditor, Cherry Beckert, where he shared his concerns. From that and follow-up calls with staff, the independent auditor's findings and recommendations include a material weakness relative to the controls environment due to the tone at the top from the tone former town manager. So tonight, Leanne Waters from Cherry Beckert will share more specifically about the work they were contracted to do for Carrie, how it is similar and different from the work that they do in other communities, and then she will provide the results of this year's audit. In addition to the anticipated clean unmodified opinion, Cherry Beckert will also provide recommended best pra practices in response to Mayor Weinre's and staff's expressed concerns. Essentially, Carrie did a great job did great work in fiscal year 2025 and there are growth opportunities and we welcome that. Leanne will then be available for any

questions that you may have. Following that, our finance director, Kimberly Branch, will share with you the favorable fiscal year 25 financial results, which includes the general fund fund balance at an amount that well exceeds policy and puts us in great shape to finish the current fiscal year 2026. Kimberly will also be available to answer your questions. Waters, Mr. Mayor, members of the council, thank you all for giving me time on your agenda here tonight to discuss the results of the 2025 audit. Excuse me. I'm going to go through the agenda that we have here on the first slide, and I will refer you to slide number 13. They're a little different from my prepared slides because they they go along with your packet, but this is your client service team this year. I am the uh engagement director. I will be the individual who is responsible for signing the audit uh on behalf of Cherry Beckard. This was my first year working with the town of Kerry in this role. Uh Dan Gogerty is our second reviewer. Uh he is someone who is independent of our audit team. um who has not worked on the audit, but who reviews it at another level to ensure that our work conforms to all standards, that your report um is prepared in compliance with GAP um and that we have provided or applied the proper procedures throughout the conduct of the audit. Dan has been part of our audit team for three years. Jennifer Moran served as the senior manager. She worked closely with the staff here during the conduct of the audit. Jyn has also been with the audit team uh here at Kerry for three years. And we had a new

senior associate, Chandler Ward, who worked on the audit this year and new key staff, Cody Russ. This is something that we try to do on a regular basis is rotate team members in and out um of your audit team so that we preserve our independence. That's very it's one of our ethical standards that we have to um apply throughout the conduct of our engagement is to remain independent. um we try to balance that with some team members who are more experienced uh so that your folks aren't training us on carry every year. So moving on to the results of the audit. One thing that u before I really get into the prepared comments on the slide, I want to let you know that this audit is not performed um as part of an investigation of any um means. Our audit has a completely different purpose than what those investigative uh procedures are are having or what they're the inquiries you might call them. The purpose of our audit is to express an opinion on the financial statements as a whole and to be able to provide assurance that those financial statements are materially correct. meaning that they do not have a what we call a material error in those financial statements that if it were corrected would change the decision that a financial statement user makes based on those financial statements. And so to do this, uh, we spend time, we make inquiries. Your mayor participated in one of those inquiries. Uh, we talked to members of management, members of staff. Uh, we gain an understanding of your processes and procedures over your key transaction cycles. Um, and that helps us to determine where your financial statements are at what we call risk of

material misstatement. And then that's where we deploy most of our audit resources because we do not review 100% of your transactions in any given year. Some of the areas that generally have a higher risk of material misstatement are areas that have a high degree of estimation involved where management's judgment and when I say management I generally mean the management of the finance department who are calculating and coming up with those estimates. Uh where they're there's a high degree of of judgment on their part. uh if there is a new accounting standards, there's also always elevated risk around that particular instance as as a team is learning the ins and outs and how to apply that new standard. And then certainly this year where the finance staff um had a new implementation of an ERP system that managed all these transactions, there is a lot of risk around just that transaction. what I will call that transaction cut. So we those are certain areas that we do tend to spend a lot of our offit our off my last name was off it before I got married. So our audit resources um so I'm going to take you to this slide here now and speak more to this slide. But we have audited the financial statements of the town of Kerry as of and for the year ended June 30th of 2025 in accordance with generally accepted auditing standards and government auditing standards. And those government auditing standards are like a second layer of auditing standards that are applied to governments. And those standards are prescribed by the United States Government Accountability Office. Um we have also issued or audited the town's compliance with the compliance

requirements that are described um in the audit requirements of federal and state awards. You may have heard it called uniform guidance. You may have heard it called a single audit. and also the annual a um the audit manual for governmental audits in North Carolina that could have a direct and material effect um on your major programs. So we do not audit 100% of your federal and state award programs. Um there is a calculation if you will that is prescribed in the guidance that helps us identify which programs will be audited as major each year. So in doing that uh we anticipate uh between now and February the 12th that we will be issuing unmodified opinions on the financial statements and on the federal and single audits. We are currently in the the final phases of our own internal quality control reviews um as we are wrapping that audit up. This slide just um identifies the programs that were audited as major this year. We have your highway planning and construction plan um program. We also audited the federal transit cluster as a major program this year. And there were two programs that were part of that cluster. The federal transit formula grants as well as the bus and bus facilities formal program. And then you had one major state program and that is your PAL bill. So all of those were similar programs and that they're all related to highways and transit. So I talked to this slide just a little bit earlier. Um when we are planning and performing our audit, we consider internal control over financial reporting really as a basis for helping us decide which um audit procedures are appropriate in the circumstances. We are

not um testing your internal controls to the level where we can offer an opinion on the operating effectiveness of those controls and we are not offering an opinion on the effectiveness of your operating controls. So this is getting into a little bit of oddities language and so I hope you all will bear with me just a little bit. Um there are certain control deficiencies that are defined by our auditing standards. The first is a material weakness and this is the highest level of standard or of of deficiency. It's the one that we consider to be the most the most really significant. Um, a material weakness is a deficiency or a combination of deficiencies internal control such that there is a reasonable possibility that a material misstatement in your financial statements would occur and would not be prevented or detected and corrected on a timely basis. The definition of a significant deficiency is very very similar, but it's not as severe um as a material weakness, but yet we still feel that it is important enough uh to bring to your attention as members of those charged with governance. This year, we did note two material two weaknesses that we consider to be material weaknesses. Uh Dana referred to the first one just a little bit earlier. Um during the conduct of our audit, uh Mayor Weinrect reached out to me. We had conducted a an interview earlier during the course of the audit. Um at which time, you know, there was nothing, for lack of a better word, exciting to report. Um but during the conduct of the audit, Mayor Weinre reached out to me on a weekend at to just to let me know that he had concerns, that concerns have been brought to his attention. um and he wanted to do the right thing and bring them to our attention as your auditors.

And so from that point um he helped us to identify some other individuals uh an employee of the town who wish to speak with us and provide information as a result um of their conversations. um and he provided us with some areas of concern and as a result of that we did expand our testing um to look at your pro at some of the uh procurement cards as well as the travel and training for fiscal year 25. We are focused solely on 2025. And so the I guess you would say the results of those procedures and additional inquiries led us to believe that the town had a deficiency in its internal control. Um specifically that control environment and the tone at the top and there is an entity called the committee on sponsoring. It's it's the committee on sponsoring organizations. I'm trying very hard not to use acronyms without defining them. uh we call that KOSO and KOSO has done a lot of work on identifying the different elements of an internal control structure and almost every government that you would step foot in you and as well as commercial businesses use that internal control structure to divi to design their internal controls. And the very foundation of an internal control structure is the to the control environment with the tone at the top, the tone that is set at the highest levels of management uh being really important and and the foundation of all of that. So, the results of our procedures did indicate that your former town manager did not always consistently model or reinforce um the expected ethical behavior that is laid out in your policy in your ethics policy. Um, messaging from your former town

manager did not always adequately communicate the importance of compliance with policies and procedures, accountability, um, and other internal control responsibilities. Um, and and unfortunately, we learned that employees did perceive that there was a risk of retaliation um, if they raised concerns. So we've given you more information there um on the effect but I but I think you all have been dealing with the effect and know that very well. So I will get down to the recommendation which is that we recommend that as a body um we say the town but essentially you all as those who are charged with governance that you periodically evaluate the the control environment by providing uh surveys particularly anonymous surveys that really would help you to evaluate uh employee perceptions of culture uh leadership behavior behavior and the effectiveness of your internal controls as your team perceives it. And we further recommend that you consider strengthening your reporting mechanisms. So what you might sometimes call whistleblower mechanisms um and particularly your anti- retaliation protections that are provided um to employees. The second material weakness is one that is very very common. Um the following misstatement was identified during our audit. Um, Kimberly talked to you all in the work session about closing out the audit and trying to identify all the transactions that occur in July, August, September before you close the books um that are really related to the prior fiscal year. Uh this year the results of our audit procedures indicated uh that there was a grant receivable and related

internal um intergovernmental revenue in the amount of $2.1 million um in governmental activities and capital projects fund um that was a material audit adjusting entries that needed to be um recorded. So that would have increased both your grant receivable and increase your intergovernmental revenue. I will tell you this was not material to the governmental activities but it is material to your capital projects major fund and therefore that's why we're reporting this as a material weakness. So, our recommendation for that is just that we recommend that the town enhance um its financial close processes to include a reconciliation of their eligible grant expenses as they are reporting it on your schedule of expenditures of federal and state awards to your intergovernmental revenue. And then Dana mentioned um that we did have some best practices to offer you. Uh we do have three. The first being that we believe you should consider adopting um a policy that governs benefits that are provided to elected officials. I've laid out for you some of the things that you could consider including in such a policy and we we think the benefit of that um is that this would really serve as a buffer between staff and elected officials when difficult decisions have to be made or advice needs to be communicated. The second control recommendation that we have or I'm I'm going to call that a best practices. It's not a deficiency in internal control. It's something that we see uh as we are conducting audits in other organizations uh that we think is good and that we like to pass on as advice to others and that is that you develop a policy addressing your chamber inner city visits. We recognize that there are

valid business purposes for these and that those purposes are myriad. There are a lot of different um business purposes and things you can learn from those uh particular trips. We would just rec uh recommend that you consider establishing a policy that clearly delineates that information um just for transparency to your citizens so that they too will understand the business purposes and and the benefits of prop participating in those types of trips. And then the final recommendation that we have uh really relates to the dollar threshold for your PECard lost receipt form. Uh the town does have detailed policies uh for how to report lost receipts um for charges that are made on the PECard, but it does lack this a strong defined dollar threshold above which employees would be required uh to reimburse the town for any PECARD transaction for which they could not provide um a valid supporting receipt. Um, kind of along with that, just to reduce the frequency of lost receipts and improve record retention, uh, we would also recommend that you consider adopting a cloud-based digital tool for the receipt and storage of receipts just to make it a little easier on your employees to to retain those and get those turned in appropriately. Okay, corrected misstatement. This is a slide I'll go through very quickly because I talked about this already when I talked about the material weakness, but we did have the $2.1 million um audit adjusting entry related to grants receivable. And then the uncorrected misstatement, this is a this really centers around the uh implementation of a new accounting standard, Gatsby statement number 101, compensated absences. So just as a course of being an employer,

the town provides certain benefits including leave off leave pay for its employees. Vacation pay, sick pay. Uh there are a number of different types of leave. Uh this standard changed the way um that governments have to measure that compensated absences. it is something that had to be applied by all governments in order to be um in accordance with generally accepted accounting principles. So during the conduct of that uh we did um identify that the beginning balance was misstated $1,145,87. Let me back that up. When you apply one of these new standards, you have to apply it what we call retrospectively. So as if it had been in place at the beginning of the fiscal year so that your years are comparative. So your town was required to make a change to the beginning balance. When you look at these financial statements in detail, it will say um net position is previously reported and then it will have a restatement. So that restatement is is what we're talking about there. So there was about a million dollars that ran through current fiscal year uh that really should have been pushed to the beginning balance. At the end of the day, your compensated absence balance is correct, your ending net position is correct, and this is an immaterial dollar amount. So uh you know, we brought it to the attention of management, but it wasn't it wasn't reclassified. I know that's a little complicated. It's it's kind of an auditor thing. Um, and probably not the most exciting thing we'll talk about tonight. Um, I did I will go through this slide very quickly. This is again you did implement Gazsby statement number 101 compensated absences this year. I will tell you this

was a heavier lift on your team uh than what we thought it would be when this standard first came out. So they had to put a lot of work into this standard required a lot of historical analysis. Um, as part of our audit, we did evaluate the town's identification of, accounting for, and disclosure of the town's relationships and transactions with related parties, understanding that I have communicated certain issues with you related to your former town management uh, town manager. We noted no additional related party transactions or related transactions that were previously undisclosed to us and we did not have any issues with any other transactions of that nature. Um now sometimes governments will enter into transactions for which there is not any authoritative literature that tells them how to record that transaction. However, um all significant transactions uh that you have in your financial statements um are apply we were able to apply authoritative guidance to those uh transactions. So for the purpose uh of my presentation, professional standards define significant unusual transactions as those that are outside the normal course of business for the town or otherwise appear to be unusual due to their timing. uh due to the size or due to the nature of the transaction. So um something that a lot of governments are participating now in and you've probably heard a lot about it or public private partnerships. So uh those don't happen every day and we consider something like that just to give you an example that might be significant and unusual for you all. I talked about accounting estimates earlier and the fact that um those do include a degree of estimation and a degree of judgment. I've

identified for you here those significant uh estimates, the ones that we consider to be significant. Um and what we do uh around those estimates is we review the inputs. We review the historical trends. We um just really look at all the assumptions and the calculations um to make sure that those are reasonable in our opinion um in relationship to the financial statement as a whole and we found them to be. So we also like to see that those estimates are consistent from year to year. So we don't want to see governments changing their methodologies for for calculating those estimates from year to year and yours are consistent. Your financial disc statement disclosures are neutral, consistent and clear from year to year. And then finally um this is something that I am required to tell you all is that we do provide you with one nonattest service. A nonattest service is anything we do for you that is not strictly related to auditing the financial statements because you are subject to a federal single audit. Another step in that procedure is that you are required to file your financial statements with the federal audit clearing house and to enter information related to your schedule of fi of um expenditures of federal awards into a data collection form. And I tell people it's it's not really the easiest form to use. I I know that's probably surprising that a federal website would not be terribly easy to use. U but we do hundreds of those every year for our clients and our team is um very proficient in using that. So we provide that service to your to your team here. We download the information. We give it to Kimberly and her team to review and approve. And once

they have done so, um that is uploaded and Kimberly will get on the site. She will certify it and finally submit that. Um so all that is to say the reason it's important that I tell you about nonattest services is that sometimes if if a firm provides too many nonattest services to you, it can impair independence. Uh we so we always make that known to you that we have that nonattest service. We've evaluated that service. It's nothing that we believe impairs our independence and we are not aware of any other circumstances or relationships that create threats uh to our independence. As I started this presentation by saying uh we work very hard to guard our independence by rotating new members onto this team every year. Um during the course of our audit, we did not encounter any significant diff difficulties in dealing with the management of your financial staff of your financial department. They provided all the information that we requested. They provided it in a timely manner. Um and to our knowledge and belief, they have answered all the many questions that we have posed to fully and to the best of their ability. Uh we did not have any disagreements with management on any kind of financial reporting, accounting or auditing matter. Um everything that we have been um reviewed, every question we've had, the adjustment that we provided um has been resolved to our satisfaction. We did not have any matters ourselves um that we had to consult outside of our engagement team and get another opinion. Um at the end of this audit, as we are getting ready to issue, we are going to request certain representations from management that will be included in a

management representation letter. It will be signed by Kimberly as the finance director, Mr. Overton as the interim town manager. Um, I tell people this is five or six pages of very specific information about the town's responsibility for internal controls. Uh, the town's responsibility to pro to report to us known fraud. Um, very specific representations about how the financial statement elements are measured. And at the end of the day, those five or six pages boil down to saying, "We've provided you with everything that you've asked for and we do not know of any information that would change the unmodified opinion that you are receiving on your financial statements. So that that is the the short version of that five or six page letter. In some cases, uh, management at our clients may decide that they want to consult with another accountant about auditing and accounting manners. It's really similar to obtaining a a second opinion. um on certain situations. Um and occasionally one of our clients won't like what we're like our interpretation of a generally accepted accounting principle or they'll disagree with us that an issue is a material weakness and they'll go out and get a second opinion. To our knowledge, there were no such con consultations with other accountants or auditors. Um we generally discuss a variety of matters throughout the year about the application of accounting principles and auditing standards. All those discussions occurred in the normal course of our professional relationship. Um fraud and illegal acts. This is something that I just want to point out to you because I know I know you're concerned. Um management did report to us very early on. I think it was maybe the second conversation I ever had with Kimberly and Dara, but management

reported to us that check fraud in the amount of $1.3 million was perpetrated against the town on or about April the 2nd of 2025. So that was perpetrated by an outside party. Upon being ma made aware of this incident, uh the financial department's management immediately reported the incident to police to get that on record. Uh they also reported it to its financial institution. The town did not suffer financial loss as a result of this incident. uh as the financial student institution credited the town's account for the amount of the fraudulent check that went through the positive pay system and so we were able to see audit evidence of that amount coming back into the town. Uh we did not have any internal control recommendations related to that particular incident because it it appeared to have happened external to that check leaving this building. Um, additionally, as I stated earlier, Mayor Weinberg reached out to us during the course of our audit and reported to us the potential misuse of the town's funds by the former town manager. And as we have discussed, we did um report a material weakness related to the strengthening of the town's control environment, specifically the tone at the top. Um and then I have identified the other investigations that have we have been made aware uh that those inquiries or investigations are ongoing. Um, going concern going concern has to do with the town's financial sustainability uh into the future, particularly looking at the next 12 months. And no events or conditions noted uh were noted that gave us any indication um that there was a doubt about the town's ability to continue as a going concern. Kimberly talked to you all about the different pieces of your annual

comprehensive financial report. It's much easier to say act first. So, I'm going to I'm going to go with that. Uh you do have your required supplementary information. Those are particularly your management's discussion and and analysis um and the schedules that really um give information on your participation in your employee benefit plans, your pension and oped plans, other post-employment benefits. Those documents that RSI as we call it is not audited. We review that information to make sure it is consistent with the financial statements and consistent with our audit evidence and we found it to be so, but we do not express an opinion. The financial statements also include supplementary information such as your schedule of expenditures of federal awards uh and federal and state awards. We do audit that schedule, the supplementary information, and we anticipate that we will issue an unmodified opinion on that supplementary information in relation to the financial statements as a whole. Uh Kimberly discussed other information, your introductory and your statistical section. Uh that information accompanies the financial statement. It is not required supplementary information because the standard setter does not require it. the standard setter being the government accounting standards board. Um, but similar to the RSI, we do not audit or express an opinion on that other information. We review it to make sure that it is consistent again with the financial statements and our audit evidence. And finally, there are three new standards that will be coming online that your finance department will be working through. uh Gatsby statement number 103 financial reporting model improvements there will be changes to the contents what is required in your management's discussion and analysis

that's one of the key things that will affect the town additionally there will be some changes to your proprietary fund statements your particularly your utility fund that you all talked about earlier um none of these changes will change the numbers it won't change the way those numbers are measured but it will change where they are presented within the financial statements. Um there will be some changes too to where your budgetary comparison schedules are. Right now you have them as statements they will move to schedules. So things will just move around just as you've learned where everything is. They're going to move on you. Uh Gatsby statement number 104 disclosure of certain capital assets. Uh this again it doesn't change the way capital assets are measured. It that there are some new disclosure requirements. I do not anticipate this will be a problem for your staff. You are largely um reporting in conformity with that standard already. And then finally there is Gatsby statement number 105 subsequent events that has to do with um events that might arise between the date of the financial statements June the 30th of any given fiscal year and the date that the uh audit report on those standard is uh finally issued um and whether it gives you guidance and a definition on what qualifies as a subsequent event that should be either recognized in the financial statements or disclosed in the notes to the financial statements. I have my contact information so that if I do not answer something for you tonight or you think of something after tonight, you can reach out uh to my email or my phone number and I'm very happy um to speak with you. So with that, that is the end of my prepared remarks. I know some of you all may have questions for me if you don't drink of water. She's talking

needed.

There's a lot of talking. A lot of talking.

Go ahead.

Yeah. So, um this is my first time to go through the first audit as a new council member. And my first question is this audit is like math calculation of all the financial reports is you're just checking the numbers are correctly calculated. But uh but the use of these um funds or some of the numbers you you won't uh ask the question about why this expenses is more than previous years.

So I guess the answer to that question really hinges around the purpose of the audit which is whether or not the financial statements are materially misstated. So and where we assess our risk of material misstatement. So transactions that fall below a certain calculated number have a lower chance of getting selected as part of our audit testing and procedures. We really tend to focus on those audit areas where we have assessed risk assess risk of material misstatement to be high. One of the things that we do is we um we do do some comparative analysis between years and we do ask questions and gain audit evidence about why um transactions may have why balances may have materially fluctuated. Um I would have to look at my working papers, but between 2025 and 2024, there were not a high degree of um transa of areas that had a lot of fluctuation.

So can I follow up just to be clear, there are hundreds of thousands of transactions and you test

certain ones. So they just pull

samples

certain ones ones that they think might be risky or different or so just to be clear.

Can I ask a question?

Yes.

So um I'm pretty sure this is probably out of your scope but um I'm still going to ask. So the two material deficiencies that you have identified, is there any potential impact on our AAA rating or do we need to be ready for that kind of impact? I don't know that I could answer that. That would be better for your bond advisor to answer. I apologize.

No, you're fine. I didn't think so, but wondering.

So, I have a question with what is the scope of your audit engagement with respect to internal town policies um with with specifically, you know, compliance requirements. So for instance, our policy 175 that says, you know, what speaks to the need of keeping a third of our general fund expenditure um listed is that reviewed for compliance as part of the audit.

When we review compliance and and when you get our report, you will also get what we call our yellowbook letter. It's our audit. It's our report over um of your independent auditor on internal control over financial reporting in accordance with government auditing standards. I'm really proud that I can say that from memory. I've only read it 45 times this year.

Um what we're really focusing on are contracts, grant agreements, uh statutes that are external to this government, not your independent your internal policies and procedures. we're really looking more at thirdparty type um issues and that is what would rise to the level of a finding. So follow on. I'm it's mentioned within the act for our policy 175 maybe it's part of the boilerplate you

know that says

sure

you will keep to this it

if if during your audit procedure you become aware of a non-compliance with an internal policy that isn't within your standard scope. Would you communicate that to management or council? Because and the reason I bring that up is I went and looked at the ACTUER for Raleigh which we'll do

and they do have a section

within their acter about their town policy or their city policy and it actually specifies where they were right and what percentage they're at and

all of that. So I I'm wondering how maybe they ask for that as part of their statement of work. I'm just surprised if it's not part of our

that is something we recalculate. You have a note. It's called the unassigned fund balance note and in that

page 84.

There you go. Um you actually describe that and so one of the things we do is we recalculate it. So I I recalculated it this year just to make sure that Kimberly wasn't misreporting the 33, you know, that she was um there when she wasn't. Um, so normally, yes, if if we would probably say something, I think what we would say is not a finding, but we would say, "Hey, Kimberly, this amount isn't right. You didn't report the right percent."

So, it's not part of your standard

alignment, part of your um stated scope. Maybe

I would I would say that that is something we would recommend that you would change your disclosure on. It would not be something that would be a finding.

I I see. Does that make sense?

Yeah. So, you happened to look at it this year because it bubbled up.

Well, just I was new.

Okay.

Completely new to your audit and so I read I have read every word of your independent of your financial statements three times now.

So, because I was new, I was very um cognizant of those things.

Okay. And I'm curious how you would feel if I told you that we were out of fund balance for a year that Cherry Becker did an audit for us. What would you say to that?

Would that surprise you?

Say because I don't know about the judgments that the that the audit team used or the conversations that they might have had.

Okay.

Other questions? But if I'm understanding correctly, you were saying it's not that you would say we were out of compliance with our policy,

but you would just note that what was documented was not calculated correctly.

I would do I would So, let me just back this up a little bit. When we review your financial statements, we have a lot of back and forth with your staff. um and we make recommendations to them. We don't draft these financial statements uh but we we might say to them, hey, we don't agree that this is reported appropriately and you need to make a change. We would like you to consider to make a change is is how we would say that. um in the course of this engagement um your your team has been very compliant I guess is the word in ma in making um the changes that we recommend both my changes as the engagement director who does the first level review as well as our second reviewer he had a number of uh recommended changes for their consideration as well and I just want to say you know what we're always focusing on is are these financial statements ments materially correct in relation to government accounting principles.

Other questions?

Thank you.

I have a Sorry. I was just waiting. You look like you were going to ask something.

I'm not ready yet.

I know. I know your looks when you're

going to ask a question. Um, is there someone, if not you, in your firm that would be would that can offer us a an opinion um on the ERP that we chose?

Yes.

Yes. Later.

Yes. Not you.

Yes. If it's not me, I tell people I'm real good with numbers, not so much with the ERPs, but yes, ma'am. There we do have someone that could give you some information on that. Not that I don't trust the team that the team chose something excellent. I would just like to have a sort of a independent opinion on that.

And one thing that I would tell you that we had uh we did have our IT team talk with the team here and talk about what they did uh what their controls were to ensure that the information transitioned over appropriately. Um, but I will tell you just from watching teams implement ERPs, it is a it's a very time consuming, very heavy lift no matter how good um the product may be.

Sure. Sure. Appreciate that. Um, and I think the this question I think is for our staff. And then I I was wondering if you could tell me just a little bit more so I better understand how the I think it was 2.1 million grant receivable revenue was was not recorded or misrecorded. Um,

I was trying to figure out how to ask

how to ask it because I I saw it said okay it but it was added to the ledger. I'm using the wrong words. I am not an accountant but it was clear that it was added and it's reflected currently in our capital fund balance. But I'm just curious about um, you know, how something like that can go unrecorded and in fact what unrecorded actually means in layman's terms. Well, I I may need to let Kimberly answer part of that

question.

Sure.

Uh, but let me tell you the way we identified that transaction. So, one of the things that we need to do every time we do an audit at any any government that has a federal single audit is we take because we're issuing an opinion on your schedule of expenditures of federal awards, we want to make sure that it is correct. And so one of the things we do is reconcile it back to your financial statements and back to uh your general ledgers. In this case, we were out by that $2 million. We just we just couldn't identify it. And so we reached out here to staff. um they investigated it more and they were able to determine that this expense had been recorded um but that the corresponding accounts receivable had not been made. I have something in my memory about why that happened but I don't want to misspeak on their behalf.

Appreciate that.

Okay,

other questions.

Thank you.

Thank you all. I really appreciate your time and again if after today other questions arise please feel free to reach out to my contact information.

Okay. Good evening Mayor and council. is so happy. I'm so happy to see you again um this evening and very pleased to be um before you to share financial highlights from the fiscal year ending June 30th, 2025. Leanne provided an update on the audit, including the audit process and key findings that support the results I will present. I will provide a deeper dive into two of our major funds with a primary focus on the general fund with a summary highlight of

the utility fund. Before we move further into the presentation, I want to highlight a few important points. This year's audit has been especially special because it included several major transitions. First, we have a few new staff members who participated in their first year audit with the town. And secondly, de um Dana and Leanne actually gave reference to this is our first year for producing financial statements using the town's new financial system. We now we are now using Oracle Fusion, a cloud-based system that took us about two years of focused deliberate work to finally say we are going live. Despite these changes and some say challenges, the team has worked diligently and collaboratively and we are grateful to be nearing completion of this year's audit process. I could not have asked for a stronger team. If I may take a minute to recognize some of the superstars who have stuck it out and continue to say yes to this work each and every day. I have with me tonight both of the assistant directors, Denanisha Harris and Dara Schoffner, and also a member of our reporting um team. And without Dara, Dara actually leads off our reporting area. Without her, I will say um we probably would not be where we are right now. Um so, we're very appreciative and I just want to say thank you all for that. I also want to sincerely thank you all, each of you for your leadership, dedication, and steadfast commitment to Car's financial stewardship. Your engagement and guidance continue to be essential to Car's financial strength and long-term success. As a reminder, during our quarterly meeting in November, I provided an initial overview of where the town's financial performance was trending for

fiscal year 2025. I am hoping by the completion of our presentations, you will also feel confident um in what we're doing. Sorry about that. Um first, I want to as a takeaway I have for you. Carrie is a strong f is in strong financial position. Spending remains within budget for major funds. Revenue continues to show growth year-over-year and we are able to add amounts to fund balance for future consideration as of the end of the year. Second, we met the policy that is set for the general funds fund balance. Third, our utility fund, another major fund, continues to show positive results. And lastly, with all with our anticipated clean, unmodified opinion that Miss Waters just discussed, we are well positioned to continue to build on our foundation of growth to advance further in our financial management. As a result of the independent financial audit, staff is able to compile and distribute the annual financial report that is referred to as our annual comprehensive financial report also known as the ACTER. The ACTER is compiled with four sections in mind um to keep in mind. They are the introduction, the financial section, the statistical section, and the compliance section. Tonight as part of our work sess session each of you received copies of the draft act a act a act a act a act a act a act a act a act a act a acter for the financial sections of the audit for purposes of the public if you are interested in definitions of these sections please refer to the most recent streaming of car's work session from this afternoon okay reflecting on fiscal year 2025

several of these highlights may feel familiar a Significant portion of the change noted this year was driven by increased property tax revenue resulting from the effective tax rate combined with the Wake County revaluation that took place effective this fiscal year. Sales tax continued to show nominal growth during the year. To remain consistent with the town's broader financial strategy, Carrie stayed focused on cash flow, strategic investment in existing assets, and careful stewardship of fund balance. As a result, budget line items were monitored more closely and additional capital projects were closed out due to the reassessment work council went through as part of the budget planning process. Both of which supported a stronger operational bottom line for this year. to see the makeup of the general fund. 59% is for property tax followed by 21% in sales tax which is included within the other taxes and licenses. Sales and services round out the top three which is where sanitation and parks and recreation revenue is captured. On the expense side, public safety is representing 27% of total spending alongside um general government which is also at 27%. Public works representing 13% of spending leaving about 33% for debt service, development, infrastructure, and other. When reviewing actual figures from the audited financial statements, please note that the fiscal year 2025, the general fund received $281 million in operational revenue and incurred 266 million in operational expenditures. When including all fund activity, the general fund also had net transfers of about 7.8.

As a result, the positive net outcome comparing total revenues and expenditures was $23.6 million. This amount represents the change in fund balance recognized for fiscal year 2025. And it is very positive and exciting news. When highlighting this dashboard of results for 2025, operating revenues came in slightly over budget and increased 20% compared to the prior year. The largest contributor to this revenue performance um as mentioned was the property tax of which we collected almost 100% at year end by year end. Sales tax recognized the nominal 1% growth year-over-year. Current year trends in sales tax are showing a slight improvement. However, fiscal year 2025 concluded with the slow growth. Operating expenditures include items such as personnel, contracted services, and small equipment. Percentages spent are slight are also slightly different from previous year. Spending was 98% of budget compared to about 94% in the prior year. Total expenses were up 1%. This increase is nominal and consistent with year-over-year in previous year. This change is related to department's continuous thinking around monitoring cost as strategic way to replenish fund balance levels depleted by previous year's investments. For fund balance, current policy states that fund balance is to be 33.33% of budgeted expenditures. when for for fiscal year 2025 that amounted to $85 million and estimates about 4 months. As we have referenced in a previous slide, we added an additional $23.6 million based on performance during this year, increasing fund

balance to 106 million. This is more than the policy suggests. Now that Carrie is shifting to a more mature community, we will revisit some of our policy statements such as this one to make assessment on if they are still relevant for today. Switching to our other major fund, the utility fund. It continues to perform positively. Revenue increased about 2 and a.5% compared to prior year. These results were in line with the budget expectations. On the expense side, operating expenses decreased at the same rate as the revenue increased and that was the two and a half percent. So that yielded almost a break break even um result for the fiscal year. To bring us back to the key takeaways from our fiscal year 2025 financial results, the town continues to be in strong financial position with an additional 23.6 6 million added to the fund balance for the fiscal year. We also met our financial policies and guidelines and our fiscal year 2025 fund balance results exceeded the town's fund balance policy. As you will recall from prior discussions, actions taken to support and maintain the town's financial health included the timely closure of capital projects, which allowed residual funds to be reverted back to their original funding sources, as well as delaying spending on non-critical initiatives. Going to next steps, staff will submit the final annual comprehensive financial report by February 12th. this year's updated deadline to the LGC. You all will receive a bounded copy shortly after that date. Simultaneously, we are working to finalize our citizen-friendly publication, the popular annual financial report. We call that a paffer.

The afer along with the paffer will be submitted to the GFOA which is the government finance officers association for reporting awards upon completion of this year's audit. That concludes my presentation. If there are any questions, I am here along with Leanne, Dana, and of course Russ to answer any of your questions.

Who wants to start?

You maybe.

Yeah. Well, my questions are not as much about what has been presented, which I think you did a very good job. Thank you.

Is more for us. We've been in a maintenance mode. So, while it looks very rosy and nice, it's really not because we have unfunded police, fire, everything else. Um,

and I don't know the impact of that. And we won't know until we get into the budget.

Correct. Yeah.

Yes. I think we'll have uh very just as we are tonight robust conversations about last year's budget. We're going to have very robust conversations about next year's proposed budget.

But I I think that's important to put out there because this looks like wow, we're doing great. We got a lot of extra money. Not really because we have a lot of unfunded positions.

I think it's a good point just um jumping on to what you said. It looks good right now because halfway through the year we we basically stopped everything we were doing.

Yeah.

And so we had what 168

unfunded

68

sorry 68

um the 68 got the 68 unfunded capital projects that were not started that citizens expected. Some of those even might have been from 2019 bond items. So it looks good and we caught up maybe and we and we diverted from going off the cliff and

now we have to get back on the road to doing what we do best which is to fund police, fire, parks and give the services that our citizens can

infrastructure.

Yeah. Sidewalks.

Sidewalks.

Right.

Can I ask a clarifying question? Kimberly, could you please tell us if there is a a a healthy proportion of our general of our fund that fund balance we keep talking about? Is there a healthy portion of that that's not committed or as I learned earlier unencumbered? As of um June 30th uh 2025, if you look at those statements that we talked about tonight, you will see an amount that says unassigned.

I think that's a safe number to look at. That's a healthy number to look at as unrestricted. Okay.

Or unassigned, uncommitted.

I have a somewhat related question. Kimberly, you've helped Bella and I uh read our ACER and understand that when meeting our fund balance requirements, there is a point at which we have too much in fund balance and that that is also a deviation from best practice. Is that a hard and fast threshold? Is that somewhat subjective in hearing that we actually are now exceeding our fund balance? How much are we exceeding it by? or are we entering that territory where we're keeping too much in fund balance?

So, it's not a hard and fast calculation. Um, most of the time we would hear about it from say our local government commission who weighs who looks at our levels compared to peers. Um, however, what I will say is we talked about we're going to be looking at these policies going forward and so I think those questions are great to ask like what level at what level do we want to keep fund balance and what will happen to those amounts over fund balance. Yeah. And Kimberly, we did cover some of this in um during our work session, but for the benefit of those uh that are um here today um in the council meeting and those are you know have

joined us virtually um we did have a slight dip in 2023 fund balance it was it went down by 2% right so we were at 31%. So our um our floor our policy says 33.33%. For 20 23 we were between 31 and 32%. So

there was a slight dip.

That's right.

But we recovered and we caught issues at the right time, put things on hold.

Yeah.

And that's how we kind of recovered and now we're in a recovery and maintenance mode for that reason.

That is correct.

Okay.

Uh

go ahead.

Yeah. So for the $23 million this year going to add to the um reserve. So uh that definitely going there or we are still have opportunities to to use this

budget. We'll talk about that with the bud with the budget discussions for next year.

Yes. One of the things that was also brought up when we talked about the acter and is that this is a a new year that our our current contract with Cherry Becker um ends this year and we have the opportunity to go back out. Does that mean we also have the opportunity to talk about what that statement of work or or contractual um agreement might look like?

Absolutely. Yes. Yeah. because I I think that, you know, lesson learned, what I think might be great is to be able to have a detailed understanding of where we are in the fund balance so that we don't have to go back and forth the pages and do the math ourselves. um having the auditor or or um finance department highlight to us where we are

and also that way we have the transparency associated not just with us but also with our residents um and as we move forward and having the discussions about what is the right number for fund

balance you know when Raleigh's fund balance percentage is 17% right ours is 33 in the third

and we're sitting in 41.

There's there sitting in 41.

There are different methods, right? And we will bring options to you. So like with Raleigh, they look at unassigned, which is a category. Our policy is based on total fund balance. So, you know, there's so many differences there that we'll have to um allow you guys to consider. So that I think as we negotiate and look for a new contract that that extra visibility, extra accountability, extra transparency would be really helpful.

I think um our mayor proam Lori Bush also um made a comment in work session which I want to share with everyone with your permission.

Sure. to highlight to color code the fund balance so that we know that you know it um is in alignment with the policy so that we don't have to go look for it and you know to your point we don't have to calculate ourselves but you know it could just become a second habit where we just you know we look for that num color coding and we can identify that number easily. Yeah, I have to say that when I was trying to understand it a little bit more, I looked at other municipalities, ca um aers, sorry, caffers, aers,

and what I enjoyed reading was actually Raleigh's because they actually talked about what their f fund balance is, how they got there, where they moved money from and to in order to keep the fund balance, um, and how to support the financial allocation of of general fund revenues. news. It was quite transparent in a way that says, you know, we we were getting a little bit low. Here's what we did and here's why we did it. And it was it was written in a way that anyone could understand.

Lori, I want to I want to make a comment that I was hoping to make which I think speaks to somewhat to what you're saying. Um Kimberly, you and the other

any of the finance or budget staff that I've interacted with was incredibly knowledgeable and, you know, never guesses, which I love. you know, brings back the information when we ask a question. I'm only speaking for myself here, but I'm sure some of my colleagues will agree. What I would like to have more of is your um your context, your opinion, and and such. I feel as though we probably would have gotten a lot more of this kind of information previous to now if there was, you know, just a a different attitude or, you know, with our leadership right at the very top sort of being the filter sometimes. I would really like to, you know, a a lot more hear what you think if that makes sense because you sure you want that? I want to heal. I can't tell you how much. Like I really do because when we have conversations and you know if I've asked you a question directly or whatever, you give such incredibly helpful context and it not just tells me what that number or the answer to the question is, but it makes me understand relative to why I'm asking where we are or what it affects what the number actually means.

And so I just wanted to invite you to

speak your mind. appreciate it

and get and and I'm looking for of course your very specific information that you tend to deliver to us but I'd also like to hear your color commentary and your opinion

very good

and Kim for for the benefit of people who are listening and who are watching this um meeting today could you explain the process like I know that in the previous meeting we kind of covered this in more detail like when do we conclude this when do we start our next discussions so that you know we can track those timelines. I know that's probably not partial.

Are you talking about the uh the timeline for how we get our report?

So, how do we conclude this like right now and um what is the I know you have next steps here,

but then what does the like exactly to what councilwoman Khan Johnson said like what like translate this for us a little bit more.

So, um we're continuing our audit mo um the financial piece is complete. We're still working on the compliance piece. That piece, just as a reminder, was deferred because was delayed um because of the federal shutdown. Um as a result of that, the local government commission um extended the formal deadline for submissions of uh in of jurisdictions financial reports to them to February the 12th. So between now and February 12th, we are hoping to Leanne wrap up this um this year's audit. So then we'll just start we'll start all over again. But February 12th is our deadline that we have to have things submitted formally to the local government commission and we can call it done from an audit perspective.

Okay. Thank you.

Yeah.

Just one more question about the the recommendations that were made by our auditor. Some of them were in the process of doing like the surveys but there was there were a couple of other comments associated with protections ensuring no retaliation. Is there a um a group that is working on implementing some of these recommendations?

We're going to add them to the implementation group that will be working on policies and procedures.

Great. So then we will see that back as a kind of a followup to the recommendation.

Yes, at some point. And also I think it'll be fitting to find out what uh Wombleon Dickinson recommends to you so that we add those to the list as well.

Will they do be iterate iterative or are you going to wait until

iterative? Yes.

Thank you.

Other questions?

Cararissa asked the question earlier about the $2.1 million and she said that you could provide more insight.

So I can tell you that from um our review process that we normally do, it

was an oversight. Um because what you what typically happens is we know we spend money during the year. Technically we should go through all of them and say is this eligible for reimbursement? if it's eligible for reimbursement within a short period of time, we should acrew it back as a receivable and a revenue. And so then in this case, it didn't pass the sniff internally. Um, which is why we immediately said yes, we should book this entry.

Yeah.

Other questions?

Can I bring up the last question? Um because we are talking about the fund balance a lot but that seems to be especially for the staff or the council and the mayor. We care about that a lot but as a citizen they may want to just to hear are we spending healthy wisely and um the property tax they paid and did they get cover all the services. Could you give us a more uh a description a conclusion about that we are doing a good job or we still have to fund more like?

So when we look at for fiscal year 2025 when we look at our revenue compared to our expenses and this is going back to our general fund because that's our operating fund. Reminder we we are adding revenues minus expenses was about 23.6 positive. That means we had no use of our reserves of fund balance. That means we could add to fund balance. So that's why we were able to add. Now if we have a year and sometimes we do is planned um we may have expenditures over revenue but again it would be planned by you all's authorization through some type of budget action. If that's the case if it's a negative number revenues and expenses that's when we are eating into fund balance. But for the past couple of years we've had positive results. So we have had we have not had that need.

So So I want to put that in layman's terms. The way I understand it, you have to have more money at the end of the

year. If you don't, you have to dip into savings.

Dip into reserves. Your

savings is your fund balance. You asked the question earlier, is it bad to have a high fund balance? I have a personal opinion because if you're collecting revenue and you're taking debt instead of using the revenue if you got too much then that's not a good use of taxpayer dollars. But that's a personal opinion. We're going to go there. We're going to have this discussion.

Uh but it's a danger that we're in. I think if we have we're at 41% I think

or as of June 30 of 2025. Yes.

41% of operations. you know, cities on the coast that have to deal with hurricanes are at 35%. And we're higher than that. So, that's a discussion we definitely have to have. So, I appreciate

Yeah.

that very much. And does anybody else have any questions because

I was just going to say quickly that I think that's why it's so important what Kim said about revisiting the policy statements to see if it's still relevant

for us to maintain that percentage of fund balance because things have changed. Our our community has changed over the years and it may be that that number isn't um the right amount for us to maintain which goes along with what you're saying. Are we meeting the needs of the community and the expectations and finding that balance?

Other

I would like to just thank you and your entire team. Um doing your job every day is hard enough but to do it while you're um under the scrutiny of so many people including us um andated by public records requests

and and you know the state auditor. I mean, you do your job as transparently as possible all the time, but this is an an additional level. And some of our questions are are hard enough, but hearing your job, you know, uh, rung through the ringer online. Um, you guys

do the hard work every day behind the scenes and I just wanted to thank you and the entire team for put also putting together a presentation. And I don't think I've ever heard such a very detailed walkthrough of the uh aer um and the amount of passion that you all have um really does translate into what makes Gary great. So I'd like to thank you all for what you do every single day, especially with everybody looking over your shoulder at the same time.

Thank you for those kind comments. We appreciate it.

Agreed. Thank you.

Thank you. And I would like to close us. Thank you. Close us out by repeating what Russ said earlier. This is an investig not an investigation. This is a report of our finances and they explain very well what this report is. It's not an opinion. That will be the state auditor. They're an elected body. They will certainly have an opinion. And I have a feeling it won't be very rosy. Uh but uh we will hear from them. And we also have the DA and the SBI looking into things. Don't know if they'll find anything. We have no idea, no information what's going on with them. And then we have the internal investigation where they will try to come up with additional uh policy and procedure changes to make us stronger to make sure this never happens again. Did I cover that?

Yes, sir. So, this basically takes one of the four and kind of concludes um that information for

us. So, there's more coming if if you're here and wondering, is that it? No, there's more coming. Anything else before we move on? All right. Thank you. If I can get my agenda back up. Hold on just a second. Here we go.

All right, we've reached the public speaks out portion of our meeting.

Oh, manager's update.

What's that? update.

I skipped right over the manager because I already called on the manager.

Yes,

you get to do it again.

I like to the last topic. I have an update as well.

Okay. Please.

Um it's going to be eerily similar similar to uh council member Bush's u ceremonial open opening comments as well. Uh because you may have man uh seen there's lots of staff up in the up in the seats tonight. But I wanted to take a few minutes to talk about our response to the winter weather response also um that we've seen over the past few weeks as we were hit by backtoback storms. Winter weather storms which they obviously name now Fern and then winter storm Giana. Uh and together they made it for a challenging week for a stretch of two weekends a road for our staff. So employees were out treating roads. Um, I don't have all the data, so Council Member Bush already gave it, but responding to issues, keeping critical services running, uh, often during long hours and tough conditions. And, uh, what really stood out as it normally does during any kind of emergency operations that we do is how many people step up and go beyond their regular roles, taking time away from their families and their per personal commitments to work ex extra shifts and help wherever they are needed. Uh, so we wanted to be sure to take time tonight to thank those staff members and recognize a special group that are here that went above and beyond to help. Um, and I'd ask Chief Cooper to come up and say a few words. And then I'd also say that I I expect that they have learned a lot about our financial statements as they were up there for the last hour and 40 minutes. So, thank you all for being here.

Good evening, Mayor and Council. Thank you, Mr. Overton and Miss Bush. you you did a great job summarizing the statistics. Great job. So, good evening, Mayor and Council. I'd like to take a moment to formally recognize and thank the more than 400 employees who worked extended hours over two consecutive weekends during the recent storms. This

was very challenging stretch for our organization. Responding to weather like this requires more than reporting for a regular shift. It means employees coming in on short notice, working long and often overnight hours, and setting aside normal responsibilities to support the town and our residents. Despite the difficult conditions, these employees stepped up without hesitation to ensure continuity of operations and kept essential town services running smoothly. Excuse me. Their efforts were critical in maintaining public safety, supporting residents, and ensuring that our facilities, infrastructure, and communications remained operational throughout the storms. Many staff ser many staff members served in emergency operations center, some for the first time, participating in special meetings, coordinating response efforts, and helping ensure decisions were made quickly and safely. Others worked overnight and extended shifts in the field or behind the scenes while balancing time away from their families and personal commitments. Throughout both storms, staff work closely with our neighboring jurisdictions and partner agencies, reflecting the strength of our emergency preparedness and our regional partnerships. The names of the staff who supported storm response are listed on the screen. If you're here this evening and work during either of those storms, I would ask you to please stand so you can be recognized. Thank you. I would also like to offer special recognition to our public works team, the A+ team.

Uh the public works team whose long hours and hazardous conditions helped ensure roads remain passable, infrastructure functioned, and critical services uninterrupted. To everyone who supported the storm's response, thank you for your dedication, flexibility, and teamwork. Your efforts made a real difference in this community and exemplify the high standard of service our residents expect and deserve. Thank you for your support. Council

Chief, thank you. I I have to say that when I talk about Kerry and talk about the best of the best. This is a perfect example. There's nobody compares to you guys. We're the first ones with the roads clear and that really impacts the citizens. They really notice it and they really talk about it. So, um, thank you. I I can't imagine going especially after the first storm. I I think I talked to you and I said, "You guys got to really be tired and then here we go again."

And you had backto back and you did both of those excellently and I'm so proud to be a citizen, let alone the mayor. So, thank you for all the work and your team did during these storms.

Thank you, mayor. Okay. Did I skip anything else? Sorry about that. Okay. Um, our next item is public speaks out. And we've included instructions for speaking at this forum online and on the printed agenda. And there's three opportunities for you to participate in public speaks out. You can do it through written comments or by calling in or by attending here in person tonight. And if you are here in person and would like to speak, I would ask that you please take a seat in the rows to my right that are highlighted. Public speaks out have three minutes each for their comments and you may speak on any topic that is not a public hearing and that's to your benefit

because public hearing speakers get more time. The three minute time limit will be enforced not to be rude but to be fair to all of our speakers. We have a timer on the podium. It'll start off with a green light. And when it turns yellow, that's a signal that you have 30 seconds remaining and you should try to wrap up. And when it's flashing red, that's the point. I'll interrupt you. Again, not trying to be rude, but just trying to be fair to all of our speakers. I would ask that all speakers please be respectful and address the council as a whole rather than individual members. And I'll remind everyone that this is a business meeting even though we just had applause. Uh this is the business portion of the meeting and we would ask that you treat it as such. Public speaks out has one hour for this act actual part of the agenda. I would ask that you please refrain from applauding, speaking from your seats, using props, or engaging in any behavior that may distract from the council listening to the speakers. Interruptions, including applause, actually take away from that one-hour time limit that we have, and that would reduce the available time for public speaks out. So, we ask that you please don't do that. Thank you in advance for adhering to our guidelines in keeping this meeting effective and respectful. This form is intended for council members to listen to public comment, not for discussion. And while we may direct staff to follow up, we won't respond to your comments at this time. Each council member is available to meet with you. I've met with individuals today. as a matter of fact. Um, and we welcome those conversations. You may reach out to us via email, 311, or just the direct

meeting request form. So, now that I've said all these things, now is the time for public speaks out. I'll start off by calling on our clerk to read any written comments and call on any registered speakers.

We've received five written comments. Um, these comments have been emailed to council prior to the meeting, provided to council when they arrived, and also attached to the online agenda for accessibility. We have two registered speakers. Our first registered speaker is Philip Katros. Hello, my name is Phil Katros. I'm a longtime resident of Kerry. Thank you, council, for allowing me the opportunity to speak out. This is actually the second time that I'm going to speak to you on uh this topic, which is about merit pay for the town of Kerry staff. I spoke here last year during the budget process and I asked you to consider maintaining the 5% merit budget that the former town manager had proposed cutting as a way of helping to balance that year's fiscal budget. My message then had three main points. Number one, cutting the merit budget is never going to be enough to solve the town's budget challenges. I believe Carrie's going to face these for several years due to a combination of inflation, slower growth, and aging infrastructure among others. Number two, as someone who's had the distinct pleasure of volunteering and working with staff from numerous departments, I believe that Carrie has the best of the best who perform well beyond the norm. Anyone who drove the roads from Kerry to any neighboring city or town during the winter weather, or anyone who interacted with 311, who worked extra weekend and evening hours saw two very recent examples of why our

town staff is the best in a high-erforming number three, sorry, in a high-erforming and a lean staffing environment, one in which Kerry has the lowest number of full-time employees per thousand residents in any municip municipality in Wake County. These cuts are dangerous. They spur or they may spur well-trained top tier staff in our town to leave for other neighboring municipalities. Some who are experiencing now much higher growth rates and have significantly higher property tax rates, which would enable them to drive employee acquisition away from the town of Kerry. Unfortunately, the budget for this year was passed with the afformentioned reduced merit budget for town of Kerry staff. But I looked at this as an opportunity to come back here again during budget process and try to persuade you once more. So, fast forward and I was very pleasantly surprised to see that our interim town manager will be making a proposal or at least I hope he's still planning to make that proposal uh to bring the current year's merit budget back to 5% consistent with years past. I applaud him for taking that action. You all as council have to decide if the various shifts in the funding that are proposed in order to bring that budget back to where I believe it should be are the right ones. I haven't studied that. I don't have an opinion on that part. But having watched the increased scrutiny that you all are rightfully given to proposed expenses, I suspect that you have or will drive that action with that proposal as well. My ask is simple. Regardless of how you get there, get there. particularly for non-executive staff who are likely the ones most impacted by the current cut. The dedicated staff of the town of Kerry are in many ways what make this place great. Let's keep it that way. Thank you.

Thank you.

Our next register speaker is Thomas Pavick.

So, I'd like to speak about the uh financial malfeasants in the news and Carrie. Um, I'm going to start out by saying we can't blame everything on Seansteagle. Uh on December 9th, W News quoted Lori Bush saying, "I also want to state clearly that there is no connection between the tuition miscommunications I have described and the questions many of you understandably have about the TA town manager's leave." But W later reported that the questions revolving around Shaunsteagle's actions began from a public information request for emails regarding the $37,000 for Lorie Bush's master's degree among other things. So actually because of Lor's uh actions, that's how this financial malfeasants came to light. And I would actually like to know why the town council has not exercised their right to replace Lori as mayor prompor. I was also surprised to learn recently that Mayor Weinrect was being paid under a contract by a local engineering firm, a firm that does millions of dollars of work for the town of Kerry, which is competitively procured, and also works for private developers, developers who need approvals from the town for their projects, including resoning, permitting, site plans, and traffic studies. By the way, I noticed in the mayor's uh recent state of Kerry address, his former firm was prominently shown in one of his slides. Um the mayor was at the same conference in Texas as Sean Steagel. Uh he says at the expense of his engineering firm where Shawn misused his spending account. Yet the mayor says he knows nothing about that. um the these things that I'm talking about are clearly a

conflict of interest. So I will conclude by saying that I'm not old enough to be the father of either one of you or any of you, but I am a father. And so I'm going to give you some fatherly advice. Same thing that I would give to my own kids. Number one, you should write a memo about everything that went wrong and how this situation can be prevented in the future. Number two, you need to resign. Next speaker, please.

No additional register speakers.

If you are here and would like to speak at public speaks out, now is your opportunity.

Can you move to your left, please? Thank you.

Good evening. Emanuel Per. I've been here before. I'm here to talk again about the lack of accountability and the toxic environment that this town has created and is ongoing. I have been defined as an angry woman and there have been false calls to civility by our mayor when in reality he is trying to avoid the accountability. The last gentleman has spoken to a lot of that. I'm here to talk about something that has to do with accountability. In the past few weeks, I myself and others have brought to your attention a what happens with the town of Kerry theater, the Kerry theater, which is owned and operated by the town of Kerry. I was told that the town of Kerry follows the master plan and that the single employee who makes all the decisions for this theater is being supervised. This is an employee who has shown in the past a shocking lack of common sense, a shocking lack of good taste. She was behind in 2022 a show that never happened. It was a drag queen story hour uh that was

supposed to be familyfriendly with people with stage names that were absolutely vulgar. And there was a public outcry. I was part of that and we foiled it. It never happened. Recently, your employee has decided to show a movie which is a a blood liel against Jews. I have brought that to your attention and I was told you follow the master plan. Well, I approve and you do not follow the master plan. The master plan is simply a fig leaf, something that you use as a paper shield. This employee has made the decision herself. The reason why we as Jews are concerned about the movie is because we know history. Just not too long ago in 2020, a similar child died in Gaza. His name was Muhammad Aldura. The media, the Western media portrayed him as being killed by the IDF. Long story short, it was the catalyst for the second inif. Um, Osama bin Laden spoke about Muhammad Alura as a justification for 911, a terrible terrorist attack against our country that costed us thousands of lives of our citizens, was the spark for wars. And then we found out that the Western media had lied. They had edited the video. The child lived. They never showed that. But it cost us human lives, not just Jewish lives. And when we bring to your attention a movie that similarly is possibly the spark, the catalyst for violence, when there have already been Jews killed on this soil recently when there are being calls in our town for global intif,

I'm sorry,

sir. I am not done. I have

I'm sorry. Your time is expired. You need

No, as a matter of fact, I still have a few seconds.

You have no time left. I'm sorry.

Thank you.

Next speaker, please. Members of the town council, Mr. Mayor, Mr. Overton, my name is Elliot Tardiff, Kerry resident since 2014, and it's a privilege to speak with you again. I have two orders of business to bring before this day is to ask for your consideration and action. First, that town leadership and staff work to improve pedestrian safety at the intersection of Kildair Farm Road and Kilmain Road, which is heavily traffked by both vehicles and pedestrians alike. There's two go carry bus stops on this part of Kildair, one on either side of Kilmain. Nearby businesses, some of whose staff walk or take public transportation to and from, as well as a daycare in a church. Yet, unlike the Maynard and Kildair intersection a few hundred yards up the way, there is only one marked pedestrian crosswalk and no pedestrian crossing lights to speak of. I worry this is an accident waiting to happen. Please be proactive and fix this now. Second, in regards to the $250,000 agreed to be spent by the town in the last meeting, number one, all invoices from the outside firm investigating matters involving the former town manager at all be made a matter of public record if they aren't already. The $150,000 was stated as a payment of services to come. So, what's been spent already? My fellow taxpayers and I deserve to know what this is costing us. Number two, the $100,000 agreed to be spent by the council for an employee engagement survey needs to be rethought and broader issues you raised need to be addressed. To be crystal clear, I want this town staff to be heard and they in the town to be better off for it. I say

this as a former employee of the state whose agency also quoting from your last meeting did a lot with a very lean workforce close quote but whose department did and to my understanding still does annual employee engagement surveys drawn up administered and finding summarized to senior management and staff all inhouse with no additional expenditure to outside firms as was agreed here. If I heard correctly, you say the communication section is too understaffed to carry this out. Yet, quote, there's been a hiring freeze. Close quote. You say you want to spend money to drive participation, but you state staff quote is really great at responding to surveys because they've done it before. Close quote. You want this quote unquote health check and quote, "You need this data now." Close quote. But I see a datus that seems content with urgency at taxpayer expense while kicking the can down the road rather than fixing what's wrong. Do right by everybody. Fix the issues at hand while instituting a regular survey schedule as policy so staff have a permanent certainty of being heard and in a way that's responsible by taxpayers too. That's a better record to have. Thank you for your time.

Next speaker for public speaks out. Good evening, Mayor and Council. I am Renee Miller, and my concern today is the proposed increase to the merit budget proposed in tonight's discussion item. There are a few things I'd like for you to consider as you are um reviewing this this matter. The first is that the is that is the reasons that employees leave.

When employers ask this question, it's usually answered as pay. But when outside surveyors ask this question, pay is typically fifth or sixth on the list. This has held true for the 30 years that I have been certified as a senior professional in human resources. So I question whether an increase will actually have the effect expected. Secondly, I was pleased this a very late this afternoon to read that Carrie has a policy in place that suggests that executive staff be exempt from this merit pool. During that first budget hearing last year, Mr. Cautros who spoke earlier suggested that this might be limited to line and lower management and I agree. By spelling this out more clearly through your policies and citing those for the public, I believe you can demonstrate transparency and we can see that you can make adjustments to ensure that we continue responsible spending in this area. I believe citizens support this policy and are especially interested in recognizing the excellent work of our staff. Finally, I ask you to consider the tax implications of of making this move. The grand total of ma of this project is $2,815,000. And that sounds insignificant when you think about car's $510 million budget. By moving money from one pot to another, there's no immediate tax implication. But the base payroll will change as you consider the fiscal year 2027 budget. The current published budget and my notes from last year's process indicate that 1% per mill equals approximately $5.3 million in revenue. So the effect could be an additional 1 half cent per mill needed to cover this cost in fiscal

year 2027. And that's before any merit increase is allotted for next year. I ask that you keep in mind that most carry citizens who work for private employers haven't had a merit increase above 2% for years and those on fixed incomes have had some recent years with no adjustment at all. Council should hold the line for now at 3% and limit any increase adopted now to frontline employees and re and then review further increases as part of the fiscal year 2027 process.

Next speaker, please.

Good evening, mayor, council members, madame clerk. I stand before you with deep humility and great gratitude for the Ramadan proclamation that we received at the beginning of this meeting. I want to thank Councilman Banso for her leadership on that. 28 days ago, I stood before you and I had some remarks that was covered by multiple media outlets. I stand here with an acute sense of the power of words and the impact that they have and the the different perspectives that words can change. I was here the last meeting for the entirety of this meeting. I can't do that now because y'all have your little niece there that is doesn't have a two-hour delay tomorrow. So, I have to leave shortly after this. I will be balanced and just and my statements I have been grilling you all if you want to say that but I'm somebody who is somebody of justice and fairness and when I was here

last meeting I watched the specifically the Pharaoh road zoning and each and every one of you starting with the mayor you listened with an attentive ear. You were empathetic to our residents that dealt with the federal road zoning. And it is my hope that that same humanity that you showed when it's time for you to vote, even though you haven't voted on it yet, that you do not allow ambitious developers to come in on this private property. into certain families. It is sacred property to move in and create all of the problems that was mentioned by the res residents before. I hope that when the cameras is off that that takes place. But with that being said, I was profoundly impressed by hope that Carrie has with each and every one of you. And I know we don't mention names, but I was very impressed with the interim town manager, Mr. Overton, his knowledge, his depth, the way he understood it, and everyone. I was very impressed of that. So, I have to be just and say I was proud of that. But I also want to say in closing, this community is still expecting transparency and ex and accountability. And hopefully we can get that. I yield my time. Next speaker for public speaks out. Anyone else for public speaks out? Seeing no one, I'll close public speaks out. And we now move to item four on the agenda, which is the consent agenda. Please keep in mind one motion approves

all of these items. And for those watching on video or streaming, I'll take a moment to read these items. On the consent agenda, we have minutes. Walnut Street parking deck gravel lot improvements amendment proposal adjustment to the adopted meeting schedule. I know we have a council member that would like to speak to one of these, but I would entertain a motion to I would entertain a motion to approve the consent agenda.

I'll move that we approve.

Second.

A motion and a second. I know we moved to discussion. I was reading notes while I pause and I know Miss Wong wanted to speak to one of the issues.

Thank you, mayor. Um uh I'd like to begin by thank uh thanking the residents who reach out to the council regarding the one street parking lot item. ask that we recap the entire process and we listen to our people's voices and we value your input. Transparency is important to us. That's why uh I want to take a moment to walk through everything. Uh beginning in October 2023, while the town was repairing the WA street parking deck, we constructed a temporary gravel lot to support overflow parking and construction vehicles. This property is owned by Academy uh Park Commercial LLC and the lot was always intended to be temporary until the property owner begins construction on this project. So that means we are using someone else's property for parking. Under the downtown development project agreement approved by the council on June 26, 2025, the town is permitted to continue using this gravel lot until construction on the new building begins, but only if we make certain visual and safety improvements such as fencing and landscaping. If we decided not to make those improvements, the agreement requires that the lot be removed and

returned to the grass by September 11, 2026. Then on January 8th, the council was presented with two options. One is for $125,000 for the improvement to the gravel lot. The other is uh 20 uh 70,000 to remove the gravel lot and return to grass. At that time, the consensus was that maintaining the parking lot because it would uh benefit our citizens. However, our councilwoman Con Johnson raised important questions about the cost which prompt us to take another look and then we asked the staff to revisit the proposal and ensure that any impro improvements still meet ADA requirements and find a more coste effective solution. Our staff did exactly that. They brought back a significant improved option which is 75,000 for the necessary upgrades and this is 5,000 more than returning the lot to grass and it preserves much needed parking for residents and businesses and visitors. Um please uh let me know if anything I did is incorrect and I would love to share that I drive to the downtown every day. I saw the parking lot is always full which is is uh 100% is using.

Thank you Miss Wong. I I would just add to that and this is just my point of view. I think staff originally thought because the worst case scenario it's years before something would be built there that they were treating it sort of as semi-permanent and we would build to the carry standards and that's why we got the 125 proposal and council said you know what it's temporary but it's it's permanent so yeah let's move more toward the temporary and spend less and that's what happened it's not that staff

just threw out a number that was crazy. They were meeting our standards. So, just wanted to point that out. So, thank you for bringing that back.

Thank you for

any other comments. We have a motion on the table. All in favor, please say I.

I.

Any oppose? Motion carries unanimously.

All right. There are no public hearings. So, we now move to discussion. We have fiscal year 2026 budget adjustment. Budget again. budget adjustment to restore funding to the employee merit program. Our interim town manager, Russ Overdom, will present the item and council may take action. Mr. Overd.

Sure. Thank you, mayor and councel. As we now know, this year our merit program was underfunded compared to prior years. Tonight, I would detail a request to restore funding to our employee merit program to match the rate of the prior budget year 2020 FY2025 at 5%. It's fitting that tonight we recognize the efforts of our staff that went above and beyond to work the last two weekends for the winter storms. Holding true to our statement of values that employees are our most important resource and part of really carries DNA and having a high performing workforce who deliver exceptional services to our citizens. So much so that 66% of our general fund expenditures are for personnel. Staffing was not added in the last two budgets and during the current year budget um we also now know that 29 positions were actually unfunded further lowering lowering our staff to citizen ratio which are lower than many in the state and further straining resources the as the community continues to grow. Carrie utilizes a pay for performance policy that rewards the highest performing staff. This policy has served us well and at the same time hasn't been evaluated in over 10 years. So also part of this I'm as I've asked for a group of

staff to re-evaluate this policy and determine if any changes are recommended uh which if they are then would come back to council for review prior to the end of this fiscal year. In order to fund this merit increase, staff is proposing to reallocate existing appropriated funding in the current year's budget. To be clear, that means no additional taxes, fees, or no or other new appropriations to the current adopted FY2026 budget. And now that we're just past the midpoint of this budget year, we are well positioned to assess where we can reallocate funding with the least disruption to operation and services to fully fund our merit program. Again, this is a reallocation to existing resources. And in that, and as the table shows, um 500,000 is proposed to come from contracted services from the town manager's office. Uh $450,000 from your midyear appropriation monies. uh traveling training at $250,000 reduction in um or reallocation the town manager's office historic preservation um of a study that uh is not planned to be performed this year of $200,000. Contracted services and parks and recreation reallocation of $200,000, solid waste contracted services reallocation of $150,000. Um and a utility fund remote water infrastructure division reallocation of $280,000. and parts um uh uh funding from the fleet department at $35,000 as well as a $750,000 transfer to the general fund from the utility fund. um in detailing see oops a slide well I'll say this um this is a summary of your midyear appropriations to date and it includes the actions you just took for the Walnut Street gravel parking lot as well as what would be the merit adjustments so I I just want to keep this chart going

till we show the balance of the uh midyear appropriation funding that was a million dollars and you currently have a $185,000 balance So with that, staff recommends that the council recognize and appropriate $750,000 of mis miscellaneous utility revenue to cover an additional indirect cost reimbursement from the utility fund to the general fund. And additionally, that council reallocate $1.7 uh million from the general fund um as earlier discussed and $280,000 from the utility fund and $35,000 from the fleet fund to increase the fiscal year uh 2026 pay for performance employee compensation program budget from an average 3% to a 5% award. And with that, I'll answer any questions.

Thank you, Mr. Overd. I'll start off by saying that Kerry's staff is the best of the best and I'll stand up to anybody anywhere and tell them that. Uh I honestly believe that and I work for a man for 29 years and he had a saying, "My biggest asset walks out the door every day at 5:00." And that's what I think about the Carrie's staff. They go home every day. That's K's biggest asset. That's why we're the best of the best. Just to give you a clue, Kerry gets recognized annually each year. This year there are 40 awards that I talk about in the state of Kerry address. That's not from the people sitting at the table. That's because of our staff. That's because they're that good. And if we want to keep the best of the best, we've got to step up and take care of the best of the best. Now I can also tell you from a business perspective when you have high turnover rate and less retention your onboarding time costs money and you're actually losing money by spending less if there's a lot of turnover. So it's important for

retention and I think our retention is is low for the field that government work. we're we're pretty low. And so to have the best of the best and take care of them just makes sense. And if you go, I don't know, we're not really efficient by doing that. Well, Carrie, somebody mentioned it earlier, has less than seven employees per thousand residents. There's nobody around us that's comes close to that. I think Raleigh's maybe seven and a half. Uh but so they're doing a lot with less and now with the extra work pounded on them by the public records requests, it's just unreal and the storms they have to deal with. So to me, this is a no-brainer, especially when you're talking about reallocation of funds and some of those things will disappear, but a lot of those things will come up in next year's budget discussions. So we'll discuss that again. Uh, but I I was really impressed by a total of $750,000 coming from the manager's office. That was very impressive to me. That's like putting your money where your mouth is if if you believe in your employees, you're going to step up and do that. And so, I love that part of the presentation and and that part of how do we pay for this? But it's to me, it's a no-brainer that if you're going to have the best of the best, you got to take care of the best of the best. and Carrie has the best of the best. So,

I said a lot.

You said it well. I I do have some strong opinions here of myself really. If I could share next, I appreciate that because um when when things started going ary for this council and our staff um in November, one of the you know, we were reacting to a lot of very negative information coming at us very quickly. Um, but I got to thank I've got to thank Russ Overton for his leadership and

others especially in the town manager's office because while we were trying to um we're kind of caught on our our back foot sometimes as far as like what do we do first and whatever. So, we were really trying to get a handle on things and he says, "Yeah, and we've got a you guys made a mistake you with the the reduction in the merit pool." And as soon as he said it, I realized I made a very, very dumb mistake myself because when we were told staff's on board and you can reduce it and everything's okay, I cannot blame that on bad information being given to me because I know better. I got a cost of living raise last year. I got a handsome merit raise. Um I think at one point I came in saying, "Oh my god, I got a raise I didn't even ask for." And that is absolute just such a lack of paying attention to what's going around me on my part. I want to personally apologize for staff for that. It it it shouldn't have taken what you said to make me see that that of all the things that we were trying to do to keep our tax increase as low as humanly possible, touching staff pay shouldn't have been one of those things. And for that, I really do apologize. That being said, one of the things I ran on the first time and then again this time is affordability. And I feel very strongly that especially, we'll call them rank and file. I've been rank and file most of my adult life. I absolutely know what it's like to have a car repair derail your entire financial health or wondering, you know, can I really afford this house anymore? Should I move in with my friend Amy? kind of it's that this is not you know 30 years ago for me this is 15 years ago for me so I do understand the struggles and I think here in Kerry we we have a new stat we have a new council and I think we have an opportunity to revisit how we approach pay in general because I

believe that we should be paying every single one of our staff members a livable wage for Carrie. That's my opinion. Actually that's the hill I'll die on. No one can change my opinion on that. And I think that this is an opportunity for us to start moving in a direction where we can all feel really good about the fact that we are setting what I would call a very good example for other employers here in Kerry. Um I have spoken to quite a few residents about this and I've had not had one person tell me, well, you know, they make enough. It's f, you know, whatever. Everybody understands that affordability is incredibly problematic right now. I do understand that that has ongoing tax implications. I do read the budget. I do understand the piece of that pie that our staff salaries takes up on our on our budget. Um and and I'm okay with that. I just want for me it's a values judgment. And for me um again I won't make the same mistake twice on this one. I'll make all kinds of mistakes. U but this is not a mistake I I'll make again. And I just wanted to just go on record with, you know, how I really see the the the entire topic of how we pay our staff and culturally. Um, I would love to be able to get the ball rolling on that being a really core piece of the culture as we reexamine absolutely everything here in the town of Kerry. So, I want to piggyback on that and I'll share some more information um on what Councilwoman Khan Johnson said and give her some credit with she's not giving it to herself, but this conversation kind of and I want everybody to have context about this. Um this conversation was really between council during one-on-one discussions and Sean Steaggle who was our town manager back then. And the conversation was how do we have a balancing act? How do we make sure that the taxes are not

we don't have to go two or three cents up and give enough um merit increase to the staff so that you know we can balance both sides. Well, with the given information that we had at that time um it was proposed that from 5% to 3% could be fine. He has spoken to um the staff members and it um for this year if we can stabilize things that would be better and then in future we can start you know identifying areas for opportunities where we can cut down cost and we can find those you know the money and you know reallocate funds. Um I was told and I I don't know I didn't confirm with uh any one of you but um Councilwoman Con Johnson and especially Councilwoman Craig were the two who said who were very hesitant with this move. and Harold

and Harold, Mayor Harold. Um and I think um they were very hesitant with this move because um especially I remember having conversation about councilwoman Craig and she kept saying that you know my heart does not agree to this and you know are you okay with the staff is fine and if it is okay with just 3% but you know please let them know that and I'm quoting you I'm sorry but this is what I know about your conversation and I felt that there was genuine um there was some genuineess like we like everybody cared we did care about the staff and we did care about how the tax implication is going to be on the residents because of the affordability factor. So we were torn on both both sides and um when the conversation kind of um you know lot of things started coming out and there was so much information out there we sat down with Russ and you know who actually gave us the true picture of where the financials

are and um we started talking about the merit increase. We were supposed to bring this conversation in December or maybe January

December 1st and then we moved it to January.

Yeah. So, but then I said, let's let's, you know, slow this down, slow the process down and um let's identify where the funds are going to be reallocated and that way um the council will um have enough time to ask questions and think through everything without hasting into any decision. So, um I want the staff to know that you're very appreciated. Everything that you do is you know like um mayor said we are very proud of that we are part of this organization but we also want the um you know residents to know that we care and we were very very careful about how to move forward but we had only certain very limited information to work with. So um I think with the given information that we have today and I know someone mentioned about you know how uh private corporation works where people don't have merit increase but um private is very different from public sector and the kind of work and the hours that public service like you know um town staff um puts in is far more than um private. So the expectations are different, life is different and the work is very cut out different. I can say this because I worked in private sector pretty much all my life. I do feel that you know um looking at where how you manage the budget Russ commendable because you cared for the people who work for you and I have to say that we gave him hard time about where the funds are going to be from how we're going to manage this but he made it happen

and thank you for being that person

because that's exactly what is needed today. I understand a lot of residents have their hesitation and you know a lot of you probably are thinking what are we doing but it's this is intentional there was a lot of thought that went into this and at this point we really need to move forward with lot of care and I know that Russ you have put that emotion and your heart into it to make this happen for the staff. So thank you for your leadership.

Thank you all. Um, I also would love to weigh in. So, public I believe our public sector servants deserve the merit this merit increase. And I also want to explain why. First off, I I national surveys have already shown that public servants make about 15 to 20% less than their private sector comparisons. So they're already um getting have a um a smaller salary base, but that comparable private sector workers, they they have the same e education and experience and they're getting more money. So asking our uh public servants to accept a reduced um or stagnant merit increase on top of that already deepens the pay penalty that they have. Now, let's all be honest. Public servants do it for the passion, but they also still have to have a livable wage. And we want them to be able to afford to live in the community in which they provide so many services. And merit pay is just one of the tools that we have to recognize strong performance and reward people like all the best of the best as you say who go above and beyond and keep and we want to keep those experienced professionals here and keep them from being pulled away to higher paying private employers. But for me and more importantly this adjustment is about writing a wrong. Um, as you probably can

tell, there was a miscommunication between what we understood staff's recommendation was and what staff believed our recommendation was. Council previously acted under information that didn't reflect staff's recommendation or the realities of what the labor market really are. And our employees shouldn't bear the consequences of that miscommunication. um restoring the merit pay increase really corrects that earlier decision and I'm glad our conversations our group conversations have brought that back and it also honors the commitment that we intend that we say every day at this day it's about the best of the best. It sends a clear message to our employees that when we see something is wrong and unfair, we fix it in the open and on the record. Right. So, I I absolutely support where we are with this staff recommendation.

Other comments?

I know we're being very repetitive at this point.

Okay. This absolutely warrants being repetitive because staff needs to hear from every one of us our thoughts on this. I I'm not going to speak for everybody because I don't know how everybody's voting. U I hear the comments, but for me personally, you need to hear that I made a mistake. And to reiterate what's been said, I I believe it's safe to say others have said they um due to miscommunication is where we landed here. As someone who works in a profession that has absolutely not been adequately compensated for their professionalism and everything they give to the community, I knew better.

As Sica said, I knew it in my gut. and I didn't question it enough. I absolutely should have gone to staff and I mean I I remember hearing the recommendation on a one-on-one and then at another time and literally I'm sure my mouth must have dropped open and and I I should have done better and as has been stated we have to in my opinion we have to correct the mistake that we made and at a time when our auditor is saying is suggesting that we consider anti- retaliation protections, whistleblowing, you know, protections. We I think we can understand how this miscommunication came to be and now it's time to take action. I also want to say that it is unfortunate that a lot of people in the community are not getting merit increases, but that doesn't mean that we act in the same way.

It means that we we step up and we lead. Um, I'm happy overall that our theme of the evening seems to be that there's a lot to be re-evaluated for the future in in all of our policies. And also wanted to point out that um it's written in the staff report, but in case everybody watching hasn't read all of the staff reports and everything that these reallocation of funds that we're looking at here do not it's not a lack of support for particular programs or whatever. For example, historic pre preservation is listed in here. As soon

as I saw it, I I said, "I'm not going to make a mistake that I did prior." I went straight to my board and said, "We are there's been some discussion about possibly taking $200,000 out of the historic preservation fund for the master plan. We had a conversation. We had a conversation with the community board and the historical society, friends of Paige Walker, just to make sure everybody understands so that they're not sitting in a they're not listening to a meeting and saying, "Oh my goodness, like you're just taking out money." And so that it's clearly written in here that the intention is for in the future to ask for that money back again. This is a year where we're not ready to use that money. So, it's an appropriate action and I I'm sure there's similar stories for other areas. So, I had obviously had a lot to say tonight. Um, but this is an opportunity to do something that we should have done um last year.

Any other thoughts? I'd like to commend my colleagues who made this previous decision and now feel that you have an opportunity to write a wrong and you've spoken so eloquently about uh standing up to do the right thing. So, thank you for that. Uh I also hold our staff in highest esteem. Um so I I think we have consensus there. I I think it could be natural at this time of increased scrutiny for residents to say, is this really the time to be rewarding employees? And I think in one regard, what has happened with our town manager isn't pertinent uh in that uh you know, this was a previous decision. This is restoring our merit pay as it had been. But in some ways I think it is especially relevant that at this time of

our employees working under some duress and I think it's fair to say even before our employee survey anecdotally we can hear of low morale that this is a way for us to publicly and literally put our money where our mouth is to show our appreciation for the staff especially during such a difficult moment. I also want to say for the benefit of residents listening, we've had robust conversations about how to do this as fairly as possible, even looking at other ways to compensate employees at this moment. And we landed on this decision because this is looking back retroactively that it makes the most sense to use the current rubric we already have in place which Russ I think it's fair to say is fairly complicated. It's not easy to distill exactly who gets compensated how much in which ways. Uh, and so for now, we were going to use that existing rubric to, as uh, Mayor Prom said, write this wrong. But I appreciate in your presentation you noting that this is yet another opportunity for us to re-evaluate going forward. So this is sort of looking backward and so we're going to use the best tool at our disposal now and have an opportunity to perhaps refine that tool going forward.

My turn.

Yes. Thank you everyone for your input. It's really a moving um moment. Um I would love to share my personal experience because um small business owner and uh if a staff is employee is not satisfied with their uh salary, they would just came to us and say I want a raise. But uh as far as I know, you never received that message before, right? So that means our staff is pretty um

like under the hat of the A+ team or the best of the best. So they have the passion to serve our community to remain that uh reputation even though they feel the pressure of the living uh cost is increasing and especially Russ um appreciate your uh 75,000 from your um town manager's office because if I'm I was uh thinking my uh when I grow up my mom doesn't have enough money I would think oh I have to save some and spend on something. So you're like this feeling oh you feel our budget is tied and you don't want to spend more and just use your office money to to benefit our staff and appreciate appreciate that and I absolutely I feel this is the merit program needs to be um 5% and move forward and uh appreciation for our staff hard work and uh especially before last year I was a citizen and I feel Whenever I talk to any staff, their face is was always a smile like the high standard of service. Uh that makes me feel uh really lucky to live in Kerry. Thank you so much. I also want to acknowledge few more people. Mayor, um, Dana Whitmar, um, Susan, Scott, Jenny for your leadership because I know you have been the biggest advocate for the staff and you, you all, your entire team worked very hard in finding money from different buckets and trying to come up with a perfect case scenario for us. So, thank you so much for putting in all this hours. Thank you. Are we ready for a motion?

Motion.

You ahead?

Yeah.

Yeah. Okay.

I I'll try.

No. No.

How about you help me?

Okay. Um

You got this.

Laura is sitting next to me. That's very I'm scared. So, um I'll put the motion to um go by staff rec staff recommendation that council recognize an appropriate 750,000 of miscellaneous utility revenue to cover an additional indirect cost reimbursement from the utility fund to the general fund. Additionally, that council reallocate 1.5 1.75 million from the general fund, 280,000 uh dollars from the utility fund, and 35,000 from the fleet fund to increase the fiscal year 2026 pay for performance employee compensation program budget from an average 3% to 5% award.

There's a motion. Is there a second?

A second.

Second. Discussion.

All in favor, please say I.

I. I. Any opposed? The motion is unanimous and

Thank you, council.

Thank you to you and your staff for everything that you do.

All right, we need to go into close session. Can I get a motion to go into

pursuant to GS 143 318 11A13 and 6. I move that we hold a close session to consult with attorneys employed by and or retained by the town in order to preserve the attorney client privilege between the attorneys and the town and to prevent the disclosure of information that is made privileged or confidential pursuant to the laws of the state and not considered a public record within the meaning of chapter 132 of the general statute and to consider the qualifications, competence, performance, character, fitness, conditions of employment or appointment or conditions of initial employment of one or more individuals. public officers or employees.

There's a motion

second

and a second discussion. All in favor, please say I.

I.

Any oppose? Motion carries and we now move into close session.

We'll reconvene our council meeting. We've concluded our business. I would entertain a motion to adjurnn.

So moved.

Second.

Motion and a second. Discussion. All in favor, please say I. I. Any

oppose? Motion carries. We are adjourned. Thank you.