Okaloosa County BOCC — August 18, 2015 — County Response to P&T 2015 — reading text

The Board of County Commissioners is in receipt of the Preliminary and Tentative Audit Findings and Recommendations which may be included in the operational audit of the Auditor General on the extent to which the Okaloosa County Board of County Commissioners (BCC and the Clerk of the Circuit Court (CCC) had taken, or were in the process of taking, corrective actions to address the findings included in the Auditor General’s Report No. 2014-068. Please find the Response of the BCC to the Preliminary and Tentative Findings and Recommendations. Finding 1: Fraud Controls and Risk Assessments COUNTY RESPONSE: The County concurs with the results of the Follow-Up Procedures directed to the previous Finding and agrees that the BCC has fully and completely addressed and have implemented the recommended corrective actions. Finding 2: Statements of Financial Interest COUNTY RESPONSE: The County concurs with the results of the Follow-Up Procedures directed to the previous Finding and agrees that the BCC has fully and completely addressed and had implemented the recommended corrective actions. Finding 3: Conflicts of Interest COUNTY RESPONSE: The County concurs with the results of the Follow-Up Procedures directed to the previous Finding and agrees that the BCC has fully and completely addressed and had implemented the recommended corrective actions. Finding 4: BCC Duties and Responsibilities COUNTY RESPONSE: The County concurs with the results of the Follow-Up Procedures directed to the previous Finding and agrees that the BCC has fully and completely addressed and had implemented the recommended corrective actions. 1  Finding 5: Fund Balance – General Fund Results of Follow-Up Procedures The BCC took no corrective action regarding this finding. The Government Finance Officers Association (GFOA) recommends that local governments establish a formal policy that provides for maintaining, at a minimum, an unrestricted fund balance in the General Fund that is no less than 2 months (17 percent) of the General Fund's operating revenues or operating expenditures. The policy should also provide for replenishing unrestricted fund balance when the balance falls below the target level. However, the BCC did not adopt a formal policy addressing an acceptable level of unrestricted fund balance in the General Fund. BCC personnel indicated that flexibility is necessary for establishing appropriate reserves and that they monitor unrestricted fund balances to ensure amounts are maintained for anticipated and unanticipated expenditures. At September 30, 2014, the County reported a General Fund unrestricted fund balance of $7,728,773, which is 10 and 9 percent of 2013-14 fiscal year operating revenues and expenditures, respectively, and less than the 17 percent level recommended by the GFOA. Policies that establish acceptable levels of General Fund unrestricted fund balance would set forth management's intent for such levels, provide public awareness of the levels, and guide BCC personnel to ensure adequate resources are available for emergencies or unforeseen circumstances. Recommendation: The BCC should adopt a formal policy addressing an acceptable level of unrestricted fund balance in the General Fund. Such policy should include a formal plan to replenish the unrestricted fund balance should it fall below the target level. COUNTY RESPONSE: The County acknowledges that Government Finance Officers Association (GFOA) recommends that local governments establish a policy on the level of unrestricted fund balance that should be maintained for the General Fund. The County views this recommendation as a best practices tool and not a requirement of law. Additionally, the extent of unrestricted fund balances that may be held during the course of a given year may vary. The County closely monitors these fund balances throughout the course of the year both as to anticipated and potentially unanticipated expenditures. The County will continue to work toward assuring that there are sufficient fund balances available to meet these needs. The BCC has been attempting to increase the level of reserves in a responsible manner through its budget process. In both Fiscal Years 2013-14 and 2014-15, the Board has approved an increase in the reserves. Recognizing that the ability to increase reserves generally requires either an increase in tax revenue or a reduction of existing services, the approach adopted by the Board is to incorporate those 2 adjustments in a reasoned and appropriate manner. 3  Finding 6: Accounting for Fuel Taxes Results of Follow-Up Procedures The BCC's actions did not correct this finding. Although BCC and CCC personnel discussed this issue and were working on a solution, separate accountability for each type of fuel tax had not been established as of June 2015. In the absence of separate accountability for each type of fuel tax, there is an increased risk that fuel taxes may be used for unauthorized purposes. Recommendation: The BCC should establish separate accountability for each type of fuel tax to demonstrate fuel taxes were spent for authorized purposes. COUNTY RESPONSE: The County agrees with the audit finding and recommendation. While the respective BCC departments exercise prudence in overseeing the appropriateness of expenditures related to the fuel taxes and examples of inappropriate use was not noted in this report, the BCC acknowledges that it should and will take further steps to ensure separation of respective gas tax dollars in order for the County to track expenditures to the respective allowable tax. Additionally, under the Constitution of the State of Florida, the CCC and the BCC are independent constitutional offices. Though the Clerk, under Article V, section 16 of the Florida Constitution is empowered to serve as the "ex officio clerk of the board of county commissioners, auditor, recorder and custodian of all county funds," the operation of his office is not subject to the direction of the BCC. In those roles, the Clerk is the custodian of all County funds and the manner in which those funds are accounted for are solely within his determination. The Clerk's constitutional grant of authority vests him with the independent authority within that area of responsibility. The specific issue raised has been addressed with the Clerk’s office and it has been encouraged to modify its accounting to separate accumulated fuel tax proceeds. Further, within the current budget being proposed for Fiscal Year 2015-16, the Board has separated the proposed expenditure of respective fuel taxes for accounting purposes which will allow the tracking of those revenues, prospectively. 4  Finding 7: Use of Law Enforcement Trust Fund Moneys Results of Follow-Up Procedures The BCC's actions partially corrected this finding. In January 2014, the Okaloosa County Sheriff’s Office (OCSO) and BCC Joint Operating Procedures for the LETF (Procedures) were revised to describe the requirements for initiating a request for expenditure from the LETF, authorized uses of LETF moneys, BCC review and approval process, and process for disbursing funds and submitting receipts. Section 5 of the Procedures requires the OCSO and any entity or organization receiving LETF moneys to provide supporting documentation, such as a summary of the costs and related receipts, for expenditures of those moneys within 90 days of disbursement by the BCC. Organizations other than the OCSO must provide the documentation for expenditures to the OCSO with a copy to the CCC. During the period August 1, 2014, through January 8, 2015, the BCC disbursed $15,000 in LETF moneys to the OCSO for subsequent disbursement to six different organizations. In approving the disbursements of LETF moneys, the BCC ensured that the intended use of the disbursements represented allowable uses of LETF moneys. However, the BCC did not ensure that the documentation for LETF expenditures was provided to the CCC within 90 days of disbursement by the BCC nor, in the absence of the required documentation, did the BCC seek reimbursement of the LETF moneys from the organizations. As of April 15, 2015, the required documentation had been provided to the CCC by only one of the six organizations. The risk that LETF moneys will be used for unallowable purposes increases when adequate support is not obtained for disbursement requests. Recommendation: The BCC should ensure that organizations receiving LETF moneys timely provide the CCC with the required documentation of the use of LETF moneys or seek reimbursement from the organizations. COUNTY RESPONSE: The County agrees with the audit finding and recommendation. As noted in the Finding, the County adopted procedures relating to the application, approval and accounting of the Law Enforcement Trust Fund moneys. These were amended in January, 2014. 5  Additional efforts are being undertaken to modify the policies to better clarify the respective monitoring responsibility between the Sheriff’s Office, the Clerk and the County. The County will continue to review this process and the procedures to make certain that all necessary documentation as to the application, approval and use of these funds are in accordance with these procedures. Finding 8: Procurement of Professional Services COUNTY RESPONSE: The County concurs with the results of the Follow-Up Procedures directed to the previous Finding and agrees that the BCC has fully and completely addressed and have implemented the recommended corrective actions. Finding 9: Contractual Services Results of Follow-Up Procedures The BCC's actions partially corrected this Finding. Contract Design. The BCC strengthened procedures to ensure contracts included adequate provisions to effectively protect its interests. Our test of 13 of the 67 contracts entered into during the period August 2014 through January 2015 disclosed that the BCC's legal counsel reviewed the proposed contracts to ensure the BCC's interests were effectively protected. Approval and Support for Contract Payments. Our review of 13 contractual services payments totaling $148,241 made during the period August 2014 through January 2015 disclosed that required approvals were obtained for the contract payments in accordance with BCC policies and procedures and that contract payments were properly supported at the time the payments were approved and paid. Monitoring of Contract Payments. CCC personnel assigned a project number to each contract to record contract payments and could compare cumulative contract payments to maximum amounts stipulated in the contracts. The 13 contractual services payments tested did not disclose any contracts that were overpaid; however, BCC records did not evidence a comparison of cumulative contract payments to maximum amounts stipulated in the contracts. Without effectively monitoring contract payments, there is an increased risk that the BCC may make contract payments in excess 6 of the maximum amount stipulated in contracts. Contract Renewals. Our review of seven contracts renewed during the period August 2014 through January 2015 disclosed that the contract renewals were properly executed in accordance with contract provisions and BCC policies and procedures. 7 Recommendation: The BCC should strengthen its procedures to ensure that contract payments are properly monitored and do not exceed maximum amounts stipulated in the contracts. COUNTY RESPONSE: The County agrees with the