Okaloosa County BOCC — August 18, 2015 — Okaloosa Follow-Up Letter and P&T — reading text

AUDITOR GENERAL S TATE OF F LORIDA Claude Denson Pepper Building, Suite G74 Sherrill F. Norman, CPA 111 West Madison Street Phone: (850) 412-2722 Auditor General Tallahassee, Florida 32399-1450 Fax: (850) 488-6975 July 31, 2015 Honorable Nathan Boyles, Chair Okaloosa County Board of County Commissioners 302 North Wilson Street, Suite 302 Crestview, Florida 32536 Honorable J. D. Peacock, II, Clerk Clerk of the Circuit Court Okaloosa County 101 East James Lee Boulevard Crestview, Florida 32536 Dear Commissioner Boyles and Clerk Peacock: Enclosed is a list of preliminary and tentative audit findings and recommendations that may be included in a report to be prepared on our operational audit of the Okaloosa County Board of County Commissioners and Okaloosa County Clerk of the Circuit Court, Follow-Up on Report No. 2014-068. Pursuant to Section 11.45(4)(d), Florida Statutes, you are required to submit within thirty (30) days after receipt of this list a written statement of explanation concerning all of the findings, including therein your actual or proposed corrective actions. If within the 30-day period you have questions or desire further discussion on any of the preliminary and tentative audit findings and recommendations, please contact this Office. Your written explanation should be submitted electronically in source format (e.g., Word or WordPerfect) and include your signature. For quality reproduction purposes, if you are not submitting your response in source format, please convert your response to PDF and not scan to PDF. If technical issues make an electronic response not possible, a hard copy (paper) response will be acceptable. Please e-mail this Office at flaudgen_audrpt_lg@aud.state.fl.us to indicate receipt of the list of preliminary and tentative audit findings and recommendations. Absent such receipt, delivery of the enclosed list is presumed, by law, to be made when it is delivered to your office. Sincerely, Sherrill F. Norman SFN/ Enclosure c: Okaloosa Board of County Commissioners County Administrator Inspector General www.myflorida.com/audgen  OKALOOSA COUNTY BOARD OF COUNTY COMMISSIONERS AND OKALOOSA COUNTY CLERK OF THE CIRCUIT COURT Follow-Up on Report No. 2014-068 PRELIMINARY AND TENTATIVE AUDIT FINDINGS NOT AN AUDIT REPORT SUMMARY This report provides the results of our audit to determine the extent to which the Okaloosa County Board of County Commissioners (BCC) and Okaloosa County Clerk of the Circuit Court (CCC) had taken, or were in the process of taking, corrective actions to address the findings included in our report No. 2014-068. Our follow-up procedures to determine the BCC’s and CCC’s progress in addressing the 21 findings and recommendations contained in our report No. 2014-068 disclosed that, as of the completion of our follow-up procedures in June 2015, the BCC’s and CCC’s actions corrected 13 findings (i.e., Nos. 1, 2, 3, 4, 8, 10, 11, 12, 13, 17, 19, 20, and 21), partially corrected 5 findings (i.e., Nos. 7, 9, 14, 16, and 18), and did not correct 2 findings (i.e., Nos. 6 and 15). The BCC took no corrective action regarding finding No. 5. FINDINGS AND RECOMMENDATIONS OKALOOSA COUNTY BOARD OF COUNTY COMMISSIONERS FRAUD AND ETHICS CONTROLS/RISK ASSESSMENTS Finding 1: Fraud Controls and Risk Assessments Previously Reported The BCC had not performed and documented periodic fraud or control risk assessments of the operations of BCC departments, developed written action plans that implement and monitor needed controls, or included a fraud response plan in its policies and procedures. In April 2013, the BCC contracted with a certified public accounting (CPA) firm to perform an overall fraud and control risk assessment, and the CPA firm released its report in August 2013. We recommended that the BCC continue efforts to ensure that periodic fraud and control risk assessments are performed and action plans are prepared to implement and monitor needed controls. In addition, we recommended that the BCC enhance its anti-fraud program policies and procedures to include a written fraud response plan. Results of Follow-Up Procedures The BCC’s actions corrected this finding. The BCC implemented the recommendations included in the August 2013 CPA firm’s fraud and control risk assessment report and adopted a written fraud response plan. Page 1  OKALOOSA COUNTY BOARD OF COUNTY COMMISSIONERS AND OKALOOSA COUNTY CLERK OF THE CIRCUIT COURT Follow-Up on Report No. 2014-068 PRELIMINARY AND TENTATIVE AUDIT FINDINGS NOT AN AUDIT REPORT Finding 2: Statements of Financial Interests Previously Reported Two BCC local officers did not file the statutorily required statement of financial interests with the Okaloosa County Supervisor of Elections. We recommended that the BCC ensure the names and positions of applicable local officers, as defined in Section 112.3145(1), Florida Statutes, are communicated to the Florida Commission on Ethics (Commission) to assist the Commission in identifying and notifying all persons required to file a statement of financial interests. Results of Follow-Up Procedures The BCC’s actions corrected this finding. The BCC established procedures to annually communicate the names and positions of applicable local officers to the Commission. In February 2014, BCC personnel communicated this information to the Commission for 31 local officers. We selected the records of 23 local officers for testing and determined that each had filed a statement of financial interests for the 2013 calendar year. Finding 3: Conflicts of Interest Previously Reported BCC policies and procedures were not adequate to identify and prevent potential conflicts of interest. We recommended that the BCC enhance policies and procedures, as needed, to identify and prevent potential conflicts of interest. Such policies could include, for example, requiring employees to disclose potential conflicts of interest. Results of Follow-Up Procedures The BCC’s actions corrected this finding. In September 2014, the BCC approved a policy requiring BCC employees to disclose, at least annually, potential conflicts of interest. The policy requires that any potential conflicts of interest be provided to purchasing department personnel for their consideration when making purchasing decisions. In February 2015, one commissioner identified to the BCC a potential conflict of interest, which was provided to the purchasing department for consideration when making future purchasing decisions. Page 2  OKALOOSA COUNTY BOARD OF COUNTY COMMISSIONERS AND OKALOOSA COUNTY CLERK OF THE CIRCUIT COURT Follow-Up on Report No. 2014-068 PRELIMINARY AND TENTATIVE AUDIT FINDINGS NOT AN AUDIT REPORT ADMINISTRATIVE MANAGEMENT Finding 4: BCC Duties and Responsibilities Previously Reported Listings of disbursements that included the check number, amount, payee, and purpose of each expenditure were not recorded in the BCC minutes, contrary to law. We recommended that the BCC ensure that the check number, amount, payee, and purpose of each expenditure are recorded in the BCC minutes as required by law. Results of Follow-Up Procedures The BCC’s actions corrected this finding. Minutes for 13 BCC meetings held during the period August 2014 through January 2015 contained a link to the CCC’s Web site that provided a disbursement listing, including the check number, amount, payee, and purpose of each expenditure. Finding 5: Fund Balance – General Fund Previously Reported The BCC had not adopted policies addressing an acceptable level of unrestricted fund balance in the General Fund or developed a plan to replenish the unrestricted fund balance should it fall below target levels. We recommended that the BCC adopt formal policies addressing an acceptable level of unrestricted fund balance in the General Fund and develop a formal plan to replenish the unrestricted fund balance should it fall below target levels. 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 Page 3  OKALOOSA COUNTY BOARD OF COUNTY COMMISSIONERS AND OKALOOSA COUNTY CLERK OF THE CIRCUIT COURT Follow-Up on Report No. 2014-068 PRELIMINARY AND TENTATIVE AUDIT FINDINGS NOT AN AUDIT REPORT 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. RESTRICTED RESOURCES Finding 6: Accounting for Fuel Taxes Previously Reported The BCC had not established separate accountability for each type of fuel tax to demonstrate fuel taxes were spent for authorized purposes. We recommended that the BCC establish separate accountability for each type of fuel tax to demonstrate fuel taxes were spent for authorized purposes. 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