f Presentation to the County Commissioners January 15, 2019 - PowerPoint PPT Presentation

f Presentation to the County Commissioners January 15, 2019

Engagement Team Leadership C LIENT S ERVICE SB & Company, LLC ❖ Bill Seymour, Client Service Partner Q UALITY ❖ Chris Lehman, Engagement Partner K NOWLEDGE 2

EXECUTIVE SUMMARY K NOWLEDGE Q UALITY C LIENT S ERVICE

Scope of Services C LIENT S ERVICE ▪ Audit of the June 30, 2018, financial statements ▪ Performance of the OMB Uniform Guidance Single Audit ▪ Audit of the County’s Agriculture Land Preservation Program Q UALITY ▪ Audit of the Local Management Board ▪ Audit of 9-1-1 trust fund ▪ National Transit Database report ▪ Reviewed Uniform Financial Report ▪ Preparation of Data Collection Form K NOWLEDGE 4

C LIENT S ERVICE Summary of the Results • Issued an unmodified opinion on the financial statements • Discovered no instances of fraud • Discovered no material weakness in internal controls; one significant deficiency related to fixed asset accounting (prior year recommendation) Q UALITY • Received full cooperation from management • Restatement for implementation of GASB 75 • Audit journal entries • No Audit journal entries noted K NOWLEDGE 5

K NOWLEDGE Q UALITY C LIENT S ERVICE

FORCAM Audit Approach C LIENT S ERVICE “Focus on Risk, Controls and Misstatement” Q UALITY K NOWLEDGE 7

Assessment of Control Environment C LIENT S ERVICE Area Points to Consider Our Assessment ▪ Key executive integrity, ethical, and behavior ▪ Control consciousness and operating style ▪ Commitment to competence ▪ Exercise oversight responsibility Control Environment ▪ Organizational structure, responsibility, and authority ▪ Enforce accountability ▪ HR policies and procedures ▪ Define objectives and risk tolerances ▪ Identify, analyze, and respond to risk Q UALITY ▪ Assess fraud risk ▪ Identify, analyze, and respond to change Risk Assessment ▪ Mechanisms to anticipate, identify, and react to significant events ▪ Processes and procedures to identify changes in GAAP, business practices, and internal control ▪ Design control activities ▪ Design activities for the information system ▪ Implement control activities ▪ Existence of necessary policies and procedures ▪ Clear financial objectives with active monitoring Control Activities ▪ Logical segregation of duties ▪ Periodic comparisons of book-to-actual and physical count-to-books ▪ Adequate safeguards of documents, records, and assets K NOWLEDGE ▪ Assess controls in place Not effective Suggested improvements Effective 8

Assessment of Control Environment C LIENT S ERVICE (continued) Area Points to Consider Our Assessment ▪ Use quality information ▪ Communicate internally ▪ Communicate externally ▪ Adequate performance reports produced from information systems ▪ Information systems are connected with business strategy Information and ▪ Commitment of HR and finance to develop, test, and monitor IT systems and Communication Q UALITY programs ▪ Business continuity and disaster plan for IT ▪ Established communication channels for employees to fulfill responsibilities ▪ Adequate communication across organization ▪ Perform monitoring activities ▪ Remediate deficiencies Monitoring ▪ Periodic evaluations of internal controls ▪ Implementation of improvement recommendations Not effective Suggested improvements K NOWLEDGE Effective 9

Evaluation of Key Processes C LIENT S ERVICE Process Function A B C D Our Assessment ▪ Cash Management ▪ Investment Accounting ▪ Investment Monitoring ✓ ✓ ✓ Treasury ▪ Investment Valuation ▪ Investment Policy ▪ Reconciliation ▪ Methodology Q UALITY ✓ ✓ ✓ ▪ Information Estimation ▪ Calculation ▪ Accounting Principles and Disclosure ▪ Closing the Books ✓ ✓ ✓ ▪ Report Preparation Financial Reporting ▪ General Ledger and Journal Entry Processing ▪ Verification and Review of Results ▪ Purchasing ✓ ✓ ✓ ✓ ▪ Receiving Expenditures ▪ Accounts Payable and Cash K NOWLEDGE Disbursement Not effective A Understand the Process C What Can Go Wrong Suggested improvements B Walk-Through D Test of Controls Effective 10

Evaluation of Key Processes (continued) C LIENT S ERVICE Process Function A B C D Our Assessment ▪ Attendance Reporting ✓ ✓ ✓ ✓ ▪ Payroll Accounting and Processing Payroll ▪ Payroll Disbursements ▪ Billing ▪ Cash Receipts Q UALITY ✓ ✓ ✓ ✓ Revenue ▪ Revenue Recognition ▪ Cutoff ▪ Physical Custody ▪ Asset and Construction in Process ✓ ✓ ✓ Fixed Assets Accounting ▪ Depreciation A Understand the Process C What Can Go Wrong Not effective K NOWLEDGE Suggested improvements B Walk-Through D Test of Controls Effective 11

Evaluation of Key Processes (continued) C LIENT S ERVICE Process Function A B C D Our Assessment ▪ Assess Internal and External Risk ▪ Regulatory Compliance ✓ ✓ ✓ ✓ Compliance ▪ Monitor Compliance ▪ Grant Compliance Q UALITY ▪ Computer Operations ▪ Segregation of Duties and Management Oversight Information ✓ ✓ ✓ ✓ ▪ Information Security and Transaction Technology Authorization ▪ Program Integrity and Change Management Not effective A Understand the Process C What Can Go Wrong Suggested improvements K NOWLEDGE B Walk-Through D Test of Controls Effective 12

Prior Year Recommendation C LIENT S ERVICE • There is no process in place to ensure that all projects included in the construction in progress (CIP) balances for the governmental activities and business type activities at year end are closed out of CIP in a timely manner. We recommend that management implement a process to review all projects at least annually, to determine if the asset has been placed into service. If the asset has been placed into service, the asset should be Q UALITY reclassified to the appropriate fixed asset account and the asset should start depreciating from the point of it being placed into service. • Status: In process K NOWLEDGE 13

Changes in OPEB Accounting C LIENT S ERVICE • GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits other than Pensions, required to be implemented for fiscal year 2018. • Net OPEB liability recorded on the Entity-wide statement of Net Position. • Restatement to beginning net position for $89 million on Entity-wide statement. Q UALITY • As of June 30, 2018, the County had a net OPEB liability of $205.7 million. K NOWLEDGE 14

K NOWLEDGE Q UALITY C LIENT S ERVICE

Required Communications C LIENT S ERVICE 1. Auditor’s Responsibilities Under Generally Accepted Auditing Standards ( GAAS) The financial statements are the responsibility of management. Our audit was designed in accordance with auditing standards generally accepted in the United States of America, and provide for reasonable, rather than absolute, assurance that the financial statements are free of material misstatement. 2. Significant Accounting Policies Management has the responsibility for selection and use of appropriate accounting policies. In accordance Q UALITY with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by management are described in the notes to the financial statements. 3. Auditor’s Judgments About the Quality of Accounting Principles We discuss our judgments about the quality, not just the acceptability, of accounting principles selected by management, the consistency of their application, and the clarity and completeness of the financial statements, which include related disclosures. K NOWLEDGE We have reviewed the significant accounting policies adopted by the County and have determined that these policies are acceptable accounting policies. 16

Required Communications C LIENT S ERVICE (continued) 4. Audit Adjustments We are required to inform the County ’s oversight body about adjustments arising from the audit (whether recorded or not) that could in our judgment either individually or in the aggregate have a significant effect on the entity’s financial reporting process. We also are required to inform the County’s oversight body about unadjusted audit differences that were determined by management to be individually and in the aggregate, immaterial. There were no passed adjustments identified during the audit process. Q UALITY 5. Fraud and Illegal Acts We are required to report to the County’s oversight body any fraud and illegal acts involving senior management and fraud and illegal acts (whether caused by senior management or other employees) that cause a material misstatement of the financial statements. Our procedures identified no instances of fraud or illegal acts. 6. Material Weaknesses in Internal Control We are required to communicate all significant deficiencies in the County’s systems of internal controls, K NOWLEDGE whether or not they are also material weaknesses. There were no material weaknesses noted during the audit. We noted one significant deficiency related to accounting for fixed assets. 17