Okaloosa County BOCC — May 17, 2013 — Balent Presentation — reading text

Okaloosa County, Florida Reporting Organization Citizens of Okaloosa County State of Florida Okaloosa County Board of County Clerk of the Property Supervisor of Sheriff Tax Collector Commissioners Circuit Court Appraiser Elections Okaloosa County Comprehensive Annual Financial Report  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. To Conclude the 2012 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 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. • 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 2012 audit presentation in letters dated March 22, 2013.  Summary of Auditor’s 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. • Two instances of material weaknesses in internal control over financial reporting and no instances of material weaknesses in internal control over major federal awards and State projects. Material Weakness related to the BCC Finding Lack of support for advertising invoices approved and submitted for payment for Tourist Development Special Revenue Fund, Conference Center Enterprise Fund and Airport Enterprise Fund. Tourist development and BP oil spill awards expended for services not provided or campaigns not approved by BCC as disclosed in Auditor General’s report. No evidence of unauthorized transactions at Airport Enterprise fund based on sample. Recommendation Internal controls over advertising disbursements in all facets of BCC operations should be reviewed and modified to ensure invoices are properly supported at the time of payment and in compliance with contractual provisions. The BCC should work with the advertising firm at the airport to obtain support for all invoices paid as we only tested as sample. Additional training for BCC employees responsible for reviewing invoice support and those confirming receipt of services should be considered due to complexities of advertising industry. Actions Taken Implementation of Operations and Procedures Manual of the Tourist Development Department provided for changes in authority level of approval of expenditures and implementation of a task order system. Further no invoices will be approved unless the actual invoice from the vendor accompanies the invoice reflecting the acquisition of the goods or services. The BCC has instituted efforts to seek recovery of inappropriate expenditures and several recoveries have been made. BCC personnel are in the process of post audit review of all advertising activity of the Airport Enterprise activity. Additional changes made in the purchasing and disbursement process extend to all County departments’ to allow effective pre audit by Clerk finance employees.  Summary of Auditor’s Results Summary of Auditor’s Results (continued) Material Weakness related to the Clerk Finding Pre audit function of disbursements of BCC transactions by Clerk finance personnel did not function as intended. Disbursement packages submitted for payment were inadequately supported at the time the invoices were approved by BCC personnel. As a result Clerk finance personnel were not able to ensure invoices submitted for payment were in accordance with terms of contracts. Tourist Development and BP oil spill awards were expensed for services not provided or campaigns not approved by the BCC as disclosed in Auditor General’s report. No evidence of unauthorized transactions at Airport Enterprise fund based on sample. Recommendation The Clerk’s BCC finance function personnel should review its disbursement procedures and strengthen controls to reduce it susceptibility to improper payments. Specifically prepayment audit and monitoring of contract provisions to ensure disbursement requests are in accordance with contract terms and supported by adequate documentation. Additional training for Clerk employees responsible for reviewing invoice support should be considered due to complexities of advertising industry. Actions Taken Preaudit function has been changed, in tandem with amended Operations and Procedures manual of the TDC, to ensure disbursement payments processed for payment are in compliance with contractual provisions and contain appropriate documentation. The change in the Clerk’s BCC preaudit function extends to all BCC departments’ disbursement requests. • No significant deficiencies in internal control reported. • No significant deficiencies for federal awards or state projects.  Summary of Auditor’s Results Recommendations to Management • Airport should not engage in advertising campaigns that involve card giveaways or allocation of resources to private entities due to the discretionary nature of such activities. • P card purchases of the deputy directors, administrative manager and the chief of airport police be approved by the Airport Director or acting Director or their designee. • Airport master lease schedule should be reviewed each month by the Airports Properties Specialist and updated for new leases as well renewals and cancellations of existing leases. • BCC Department Heads/Directors should strengthen its disbursement request procedures to ensure contract provisions are monitored and the disbursement packages submitted for payment contain proper support to allow for effective pre audit by Clerk’s BCC finance function personnel. • The water and sewer department has consolidated the duties of their IT supervisor and Customer Service Manager. We recommend the positions be separated. • Water & Sewer finance manager should work with Clerk’s BCC finance function personnel to document year end procedures and reports needed. • Formally document enterprise risk assessment. Will help management identify control gaps, strengthen existing controls and remove redundancies where possible (BCC/Clerk). • BCC, Clerk, Tax Collector, Sheriff, PA and SOE could strengthen its anti-fraud program by adopting periodic documentation of fraud risk assessments; a written fraud response program and training for County employees on the warning signs of fraud.  Reserves and Fund Balance As of September 30, 2012, Okaloosa County governmental funds had combined fund balances of $49.9 million, a decrease of $2.5 million over the prior year balances. Reserves and Fund Balances Fiscal Year 2012 Capital Project Funds ($ million) $14.9 30% General Fund Reserved $0.3 1% General Fund Unreserved $8.1 16% Tourist Development $13.2 26% Other Funds Reserved $0.2 0% Special Revenue Funds $13.2 27% Total: $49.9 million Source: 2012 Comprehensive Annual Financial Report  Components of Fund Balance As of September 30, 2012, Okaloosa County governmental funds had combined fund balances of $49.9 million, which are comprised of five separate components of fund balance. GASB 54 established five fund balance classifications of nonspendable, restricted, committed, assigned, and unassigned. Reserves and Fund Balances Fiscal Year 2012 ($ million) Assigned Unassigned $5.0 $7.5 10% 15%