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HomeMy WebLinkAboutAgenda - 12-01-1998 - 10cORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: December 1, 1998 Action Agenda Item No. gip„ C, SUBJECT: 1997-98 Comprehensive Annual Financial Report DEPARTMENT: Finance PUBLIC HEARING: (Y/N) No BUDGET AMENDMENT: (Y/N) No ATTACHMENT(S): CAFR and Single Audit Reports (Separate Cover) INFORMATION CONTACT: Ken Chavious Ext. 2453 TELEPHONE NUMBERS: Hillsborough 732-8181 Chapel Hill 968-4501 Durham 688-7331 Mebane 227-2031 PURPOSE: To receive the Comprehensive Annual Financial Report (CAFR) and Single Audit Report for the fiscal year ended June 30, 1998. BACKGROUND: The CAFR covers all financial activity of the County for the 97-98 fiscal year and the Single Audit Report focuses on grant compliance for the same fiscal year. Both reports result from and annual audit of the County's financial records which occurred during the past several months. Presentation of these reports is necessary in order to fulfill the requirements set forth in Chapter 159-34 of the North Carolina General Statutes. The results of the 1998 audit were very good. Undesignated fund balance in the general fund reflects an increase over the prior year. This increase places the County well above the Local Government Commission's minimum recommendation of 8%. In addition, year-end fund balance surpasses the levels established in our budget guidelines. The County's financial condition continues to strengthen with this sound fund balance position. The auditors found no instances of material weakness in the County's internal control structure and have issued a positive opinion on our financial statements. The auditors issued a letter of recommendation citing two issues related to staff procedures. These are isolated instances for which procedures are in place to prevent reoccurrence. There were no findings or questioned costs related to the Single Audit. The County Finance Director will cover in more detail some of the highlights of the report and will be available to answer any questions along with representatives of the County's certified public accounts, Deloitte & Touche. RECOMMENDATION(S): The Manager recommends that the Board receive the report for information only. X. FINANCE DEPARTMENT November 24, 1998 ~c~/ The. Board of County Commissioners Orange County, North Carolina ~` ~'. V ~ ~'•~~ a~a`'• ORANGE COUNTY NORTH CAROLINA I am pleased to present you with a Comprehensive Annual Financial Report which reflects very positive outcomes on the County's financial condition as well as the fiscal processes and procedures followed by County staff. This report results from an annual audit of the County's financial records that took place during the past several months. The audit was performed by Deloitte and Touche, LLP. The attached letter outlines two azeas noted by the auditor's in their review. These are isolated incidents for which procedures aze currently in place to prevent reoccurrence. Management Supervision and Review This item represents review and approval of journal entries prior to input. Journal entries aze manual entries that aze usually prepared to make corrections and/or to record transactions that aze not computer generated. The majority of these entries are prepazed by the staff accountant and aze usually routine from month to month. It is my responsibility as Finance Director to review these entries prior to input. This review normally takes place as entries are prepared throughout the month but was not performed in the period mentioned by the auditors. This issue has been discussed by stafly and a process is currently in place to insure that this review takes place in periods when I face time constraints which impede my ability to perform certain routine tasks. Since the majority of these entries are prepazed by the staff accountant, another member of the Finance staff has been authorized to review and approve the routine entries when I am unavailable. rchasin This item represents overpayment'to a cornractor. The overpayment was discovered and corrected by the Purchasing Department, however the proper paperwork was not forwarded to the Finance Department. As a result the Finance Department was unable to make the appropriate journal entry reflecting the outcome. 208 SOUTH CAMERON ST + P.O. BOX 8181 • HILLSBOROUGH. NORTH CAROLINA • 919!732-8181 Since this was considered as an exchange of paperwork only with no money involved, coupled with the fact the paperwork was received on the last day of the fiscal year, normal communications did not occur. The Purchasing and Finance Departments work together on a duly basis to resolve similar issues and this communication is normally very effective. We believe this to be an isolated incident. The staffs of both departments have been made awaze of this incident and the need to continue communicating these matters more effectively. As mentioned above, I am pleased with the positive outcome of this audit. The staffs involved in the audit process are committed to continued accountability and award winning financial reporting regarding the management of the County's financial resources. I will officially present the CAFR to you on December 1, 1998. Yours truly, .~ enneth T. Chavious Finance Director Attachments. Deloitte & Touche Deloitte &Touche LLP Telephone: (919) 546-8000 ~ Suite 1800 Telex: 4995716 First Union Capitol Center Facsimile: (919) 833-3276 150 Fayetteville Street Mall P.O. Box 2778 Raleigh, North Carolina 27602-2778 October 2, 1998 The Board of County Commissioners Orange County, North Carolina In planning and performing our audit of the general purpose financial statements of Orange County for the year ended June 30, 1998 (on which we have issued our report dated October 2, 1998), we considered its internal control in order to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on the Company's internal control. Such consideration would not necessarily disclose all matters in the Company's internal control that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the Company's internal control and its operations that we consider to be material weaknesses as defined above. We did note other matters related to the Company's internal control and certain other accounting or administrative matters. Our principal observations and recommendations are summarized below. MANAGEMENT SUPERVISION AND REVIEW Journal entries made by Finance Department staff were not properly reviewed and approved by the appropriate level of Finance Department management. The lack of approval appeared to be isolated to a specific period of occurrence, the majority of findings during the month of May 1998. These entries should be subject to review throughout the month, rather than only at month end to ensure the consistent and proper recording of County journal entries throughout the year. PURCHASING The Finance Department and Purchasing Department both retain copies of the Application and Certificate for Payment for all County purchases requiring purchase orders. During the current fiscal year, for a specific contractor, an overpayment occurred. The contractor refunded a portion of this overpayment, and retained the remaining payment for work to be performed. These activities were all handled and maintained through the Purchasing Department. This information DeloltteTouche Tohmatsu was not forwarded to the Accounts Payable department, and therefore the appropriate accounting adjustments were not made. In addition, this payment represented the final application of a contract, but the final Certificate for Payment was not obtained by the Accounts Payable, therefore this contract was still carried as an open account at June 30, 1998. All construction payments should accompany a Certificate for Payment that has been properly reviewed and authorized by the Purchasing Department. In addition, all contract activity should be reported to the Finance Department. This report is intended solely for the information and use of the Board of County Commissioners, management, and officials of state and federal agencies. However, this report is a matter of public record, and distribution is not limited. We will be pleased to discuss these comments with you and, if desired, to assist you in implementing any of the suggestions. Yours truly, ~~v ~ ~~- L~l~° Deloitte & Touche Deloitte &Touche LLP Suite 1800 First Union Capitol Center 150 Fayetteville Street Mall P.O. Box 2778 Raleigh, North Carolina 27602-2778 October 2, 1998 The Board of County Commissioners Orange County, North Carolina Telephone: (919) 546-8000 Telex: 4995716 Facsimile: (919) 833-3276 In planning and performing our audit of the general purpose financial statements of Orange County for the year ended June 30, 1998 (on which we have issued our report dated October 2, 1998), we considered its internal control in order to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on the Company's internal control. Such consideration would not necessarily disclose all matters in the Company's internal control that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the Company's internal control and its operations that we consider to be material weaknesses as defined above. We did note other matters related to the Company's internal control and certain other accounting or administrative matters. Our principal observations and recommendations are summarized below. MANAGEMENT SUPERVISION AND REVIEW Journal entries made by Finance Department staff were not properly reviewed and approved by the appropriate level of Finance Department management. The lack of approval appeared to be isolated to a specific period of occurrence, the majority of findings during the month of May 1998. These entries should be subject to review throughout the month, rather than only at month end to ensure the consistent and proper recording of County journal entries throughout the year. PURCHASING The Finance Department and Purchasing Department both retain copies of the Application and Certificate for Payment for all County purchases requiring purchase orders. During the current fiscal year, for a specific contractor, an overpayment occurred. The contractor refunded a portion of this overpayment, and retained the remaining payment for work to be performed. These activities were all handled and maintained through the Purchasing Department. This information DeloitteTouche Tohmatsu was not forwarded to the Accounts Payable department, and therefore the appropriate accounting adjustments were not made. In addition, this payment represented the final application of a contract, but the final Certificate for Payment was not obtained by the Accounts Payable, therefore this contract was still carried as an open account at June 30, 1998. All construction payments should accompany a Certificate for Payment that has been properly reviewed and authorized by the Purchasing Department. In addition, all contract activity should be reported to the Finance Department. This report is intended solely for the information and use of the Board of County Commissioners, management, and officials of state and federal agencies. However, this report is a matter of public record, and distribution is not limited. We will be pleased to discuss these comments with you and, if desired, to assist you in implementing any of the suggestions. Yours truly, D~~ ' ~~ ~