Okaloosa County BOCC — June 2, 2015 — Balent - Presentation — 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 2014 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 BCC and all Constitutional Officers. • Estimate of accrued liability for general, automobile and workers’ compensation claims applicable to BCC 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. BCC and other Constitutional Officers use commercial insurance for these types of claims. • 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 2014 audit in letters dated April 30, 2015.  Summary of Auditors’ Results Summary of Auditors’ Results • Unmodified opinions issued with respect to the financial statements and with respect to compliance for major federal and state programs. • There was a material weakness and significant deficiencies in internal control over financial reporting identified, two significant deficiencies relating to compliance that were identified, and no instances of material weaknesses in internal control over major Federal awards and State projects. • Recommendations for management can be found in the management letter.  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 2014. • Bank reconciliation preparation and review for BCC and Clerk bank accounts were not consistently performed in a timely manner during FY 2014. Certain accounting duties were also not properly segregated during FY 2014; however compensating controls were initiated until staffing levels were returned to the proper level. • 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; however it may not be effective based on the volume of activity. • Custody and record keeping responsibilities surrounding inventory at the Water and Sewer operation and Fleet operation were not properly segregated during FY2014. • 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 recognition in the water and sewer fund. Revenues reported were understated until corrected by audit adjustment.  Summary of Auditors’ Results Matters to bring to the attention of governance as it relates to compliance • A sample of sole source purchases tested produced instances in which the documentation requirements did not meet the standards established by the BCC in its purchasing manual. • The accounting for fuel taxes by the BCC may not be robust enough to ensure the expenditures for each type of tax are expressly allowable under statutory provisions.  Summary of Auditors’ Results Recommendations to Management • Water & Sewer department should consider development of written comprehensive accounting policies and procedures for financial activity of the W&S operations. • The BCC and Clerk should consider formal documentation of enterprise risk assessments of key business processes and control activities currently in place. • Airport should consider development of written comprehensive accounting policies and procedures as they relate to billing procedures and for conducting audits of outside parties that pay rent or other fees to the Airport on a percentage of sales basis. Additionally, management should consider the needs for a degreed financial specialist and a formal transition plan for a key employee in its Finance and Administrative position. • Minor P card infractions should be addressed in a consistent and timely fashion by the purchasing department as outlined in the purchasing manual. • Purchasing department should consider enhancement of the current process for monitoring contracts as it relates to renewals or re‐bidding and additional training and education to facilitate purchasing best practices.  Components of Fund Balance As of September 30, 2014, Okaloosa County governmental funds had combined fund balances of $60.7 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. Assigned Reserves and Fund Balances $3.4 Fiscal Year 2014 6% Unassigned ($ million) $6.9 11% Committed Nonspendable $0.5 $0.3 1% 0% Restricted $49.6 82% Total: $60.7 million Source: 2014 Comprehensive Annual Financial Report  General Fund – Fund Balance, Revenue and Expenditures General Fund Balance Unrestricted Fund Balance Restricted/Non‐Spendable Fund Balance $9 $0.31 $8 $0.32 $7 $0.37 $6 $5 Millions $4 $8.11 $0.37 $7.70 $2.90 $6.60 $3 $2 $3.56 $1 $1.88 $0 2010 *2011 *2012 *2013 *2014 * * *Figures are not a true comparison to prior years due to adoption of GASB 54, which includes collapse of Fine and Forfeiture Fund. Source: 2014 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 $88 $86 $84 $82 $80 Millions $78 $87.4 $86.6 $87.2 $86.4 $85.4 $76 $82.9 $74 $80.9 $79.5 $77.6 $72 $75.4 $70 $68 2010 *2011 *2012 *2013 * *2014 * *Figures are not a true comparison to prior years due to adoption of GASB 54, which includes collapse of Fine and Forfeiture Fund. Source: 2014 Comprehensive Annual Financial Report  Property Tax Revenue Ad Valorem Property Tax Revenue $65 $60 $55 $50 $45 $40 Millions $35 $30 $25 $51.6 $47.4 $45.1 $47.0 $44.3 $20 $15 $10 $5 $0 2010 2011 2012 2013 2014 Source: 2014 Comprehensive Annual Financial Report  Governmental Activities – Revenue and Expenses Governmental Activities Revenue Fiscal Year 2014 Transfers ($ million) $22.0 15% Other $3.4 2% State Shared Revenues Charges for Services