Okaloosa County BOCC — July 6, 2016 — County PowerPoint 9 30 15 — reading text

 Required Communication During and at the Conclusion of the Audit Process Our Responsibilities • To express an opinions about whether the financial statements, prepared by management with your oversight are fairly presented, in all material respects, in conformity with GAAP. • Our audit includes understanding Okaloosa County and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design nature, timing and extent of audit procedures. Material misstatements can result from error, fraudulent financial reporting, and misappropriation of assets or violations of laws or governmental regulations.  Required Communication During and at the Conclusion of the Audit Process To Conclude the 2015 Audit Process • Key estimates in the financial statements that are particularly sensitive because of their significance to the financial statements and because the possibility they may change, possibly significantly in the near term, include: • Estimate for allowance for bad debt in the Water and Sewer, Airport, and EMS Funds. • Estimate of landfill closure and post closure costs in the Solid Waste Fund. • Estimate of accrued liability for post employment benefits other than pensions (healthcare) applicable to BOCC and all Constitutional Officers. • Estimate of accrued liability for general, automobile and workers’ compensation claims applicable to BOCC and all Constitutional Officers except Sheriff under the self‐insurance program. Sheriff uses commercial insurance for these types of claims. • Estimate of accrued liability for medical claims applicable to the Sheriff under the self‐insurance program. BOCC and other Constitutional Officers use commercial insurance for these types of claims. • Estimates required under GASB 68 concerning the calculation of the net pension liability and related deferred inflows and outflows. Estimates were provided to Management based on an actuarial analysis. • No difficulties encountered in the performance of the audit. • No disagreements with Management. • We received representations from the management of the BCC and all Constitutional Officers in relation to the 2015 audit in letters dated May 27 and March 4, 2016.  Summary of Auditors’ Results Summary of Auditor’s Results • Unqualified opinions issued with respect to the financial statements and with respect to compliance for major federal and state programs. • There was one material weakness and four significant deficiencies in internal control over financial reporting identified, there were no instances of noncompliance, and no instances of material weaknesses in internal control over major Federal awards and State projects.  Summary of Auditors’ Results Matters to bring to the attention of governance as it relates to the system of internal control over financial reporting • Capital asset accounting for the County was not performed timely during FY 2015. • Public Works and Facility Maintenance has substantial amounts of inventory on hand that has not been counted and reconciled on a routine basis to perpetual inventory records. Additionally, the inventory has not been physically recorded in the general ledger as its value was assumed to be immaterial. • Vendor master file maintenance is performed by accounts payable clerks in the Clerk Finance function. To compensate for the lack of segregation of duties a compensating control has been established. Due to the volume of transactions processed we believe the segregation of duties should be properly designed. • The Airport does not have an accounting policy and procedure manual established that is necessary to monitor activities related to the billing and collections of revenues. Various exceptions were found in testing provisions of lease agreements. The exceptions were not material. • A material adjustment to the Water and Sewer Fund of $1.48 million was proposed by the auditors and accepted by management to correct revenue recorded related to the Eglin Wastewater Treatment project. Revenues reported were overstated until corrected by audit adjustment.  Impact of New Accounting Standard Pension Accounting GASB Statement 68 – Accounting and Financial Reporting for Pensions Key Components of Pension Accounting: • Total Net Pension Liability – Proportionate Share for County Approximately $54.8 million • Total Net Pension Liability – Florida Retirement System Approximately $23 billion  Reserves and Fund Balance As of September 30, 2015, Okaloosa County governmental funds had combined fund balances of $83.1 million, an increase of $22.4 million over the prior year balances. Reserves and Fund Balances Fiscal Year 2015 Capital Project Funds ($ million) $25.3 General Fund 30% Nonspendable $0.4 0% General Fund $9.6 12% Debt Service $1.0 1% Special Revenue Funds Tourist Development $13.4 $33.4 16% 40% Total: $83.1 million Source: 2015 Comprehensive Annual Financial Report  Components of Fund Balance As of September 30, 2015, Okaloosa County governmental funds had combined fund balances of $83.1 million, which are comprised of five separate components of fund balance. GASB 54 established five fund balance classifications of nonspendable, restricted, committed, assigned, and unassigned. Reserves and Fund Balances Assigned Fiscal Year 2015 $7.5 Committed ($ million) 9% $0.6 1% Unassigned $5.2 6% Nonspendable $0.4 1% Restricted $69.4 83% Total: $83.1 million Source: 2015 Comprehensive Annual Financial Report  General Fund – Fund Balance, Revenue and Expenditures General Fund Balance Unrestricted Fund Balance Restricted/Non‐Spendable Fund Balance $11 $0.41 $9 $0.31 $0.32 $7 $0.37 Millions $5 $9.58 $8.11 $7.70 $0.37 $6.60 $3 $3.56 $1 2011 2012 2013 2014 2015 ‐$1 * * Source: 2015 Comprehensive Annual Financial Report  General Fund – Fund Balance, Revenue and Expenditures General Fund – Revenue and Expenditures Revenues and Other Financing Sources Expenditures and Other Financing Uses $94 $92 $90 $88 Millions $86 $92.4 $84 $90.4 $87.2 $87.4 $82 $86.6 $86.4 $85.4 $82.9 $80 $80.9 $79.5 $78 2011 2012 2013 2014 * 2015 * Source: 2015 Comprehensive Annual Financial Report  Property Tax Revenue Ad Valorem Property Tax Revenue $65 $60 $55 $50 $45 $40 Millions $35 $30 $25 $49.7 $47.4 $45.1 $47.0 $44.3 $20 $15 $10 $5 $0 2011 2012 2013 2014