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HomeMy WebLinkAbout2001 S Finance - Cherry Bekaert & Holland Governmental Accounting Standards Board Statement 34 Implementation November 14,2001 Mr. Ken Chavious,Finance Director Orange County Post Office Box 8181 Hillsborough,North Carolina 27278 Dear Ken: We enjoyed the opportunity to meet with you and the other members of the County's GASB 34 implementation team to discuss the action plan that was identified in our recently completed GASB 34 status assessment. Based on this meeting and our subsequent discussions, the County has requested our assistance in the following areas: • participating in the County's software vendor selection process • analyzing Fund 61 • analyzing program and general revenues • consolidating individual department spreadsheets for automation equipment,office equipment and other equipment • developing a detail of land owned using available deed of trusts • developing a methodology for allocating historical cost for buildings for each property • establishing the dates each piece of real estate was placed in service • reconstructing missing data from your current capital asset records • determining the estimated useful lives for each category of capital assets • computing accumulated depreciation as of June 30, 2001 • mapping Go Fund • computing beginning of the year conversion adjustments • computing the current year refunding conversion adjustment • computing beginning of the year net assets • drafting beginning of the year notes to the general purpose financial statements • preparing pro-forma Government Wide Financial Statements as of June 30,2001 • preparing a preliminary Management's Discussion & Analysis using June 30,2001 data The following proposed process outlines our overall approach as well as describing the individual elements and outcomes of each project. We expect to conduct many of these projects on parallel tracks. Software vendor selection process We will attend selected meetings as determined by the selection committee. We will assist in the interview process of each vendor and assist the County in determining that the software vendor selected is GASB 34 compliant. Analysis of Fund 61 We will assist the county in analyzing the various projects and activity that is currently being recorded in fund 61.The primary objective of this analysis will be to assist the county in closing down this fund and relocating existing projects, revenues, expenses and balance sheet accounts to other funds. Analysis of all revenues We will assist the County in completing the GASB 34 Analysis of Revenues template that was developed during our GASB 34 status assessment. The deliverable for this project will be the completed template breaking out all revenues between general and program. Consolidation of individual department spreadsheets During our initial GASG 34 assessment our review indicated that the County did not have capital assets accumulated into one document. Our review indicated that capital assets were being maintained on excel spreadsheets by individual departments. The deliverable for this project will be the consolidation of all departmental capital assets spreadsheets into one document plus the addition of the land and building detail. Development of land detail and establishment of purchase date Our review of capital assets indicated that land that is currently owned by the County is not recorded in the capital asset records. The County has provided us with a detail of all land that is owned by the County as of June 30, 2001. The deliverable for this project will be to go through the records provided by the County and incorporate all of the land owned by the County into the capital assets records.Based upon our review of the deed of trusts we will also establish original cost values and the date land was placed in service. Allocation of building cost and establishment of purchase date Our review of the capital asset records indicated that the County did not have a detail listing of buildings owned.The existing records had a lump sum balance for all buildings that have been purchased over the years. The County has provided us with a detail of all buildings owned by the County as of June 30,2001. The deliverable for this project will be to go through the records provided by the County and allocate the existing cost recorded in the capital asset records between all of the buildings. We will also review the deed of trusts and will establish the date each building was placed in service. Reconstruction of missing capital asset records Our review of capital asset records indicated that the County had lump sum balances for capital assets acquired prior` to a specific date. Our deliverable will be to go through the capital asset records and allocate these lump sum balances between existing assets. Establishment of estimated useful lives Once all of the capital assets records have been established, we will assist the County in establishing the estimated useful lives for each category of asset. Once a policy has been established,we will incorporate this data into the capital assets subsidiary ledger. Computation of beginning of the year accumulated depreciation Once we have accumulated all of the data required for the capital asset subsidiary ledger,we will calculate and record beginning of the year accumulated depreciation balances. Go Fund mappings Since the County is in the process of selecting a new general ledger accounting system,the County has elected to use Go Fund in the interim to accumulate the data necessary to produce the government wide financial statements. Our deliverable for this project will be to go through the June 30, 2001 trial balance and map the existing general ledger accounts so that the detail information can be sorted as required to produce the government wide financial statements for June 30, 2002. Computation of beginning of the year conversion adjustments GASB 34 requires that the County present government wide financial statements for the year ended June 30,2001.This is going to require that the County calculate and record beginning of the year conversion entries for the governmental funds. The entries required will be the recording of accounts receivable, capital assets, long term debt, accumulated depreciation, and the elimination of internal service funds. Our deliverable will be the accumulation of these entries as of June 30, 2001 into a template that can be used at June 30, 2002. Computation of current year refunding conversion adjustment The County did a refunding on general obligation bonds in July of 2001. GASB 34 requires that all general fund refundings occurring after the implementation date be converted to the proprietary basis of reporting in the government wide financial statements. Our deliverable will be to go through the bond documents and calculate this adjusting entry for the year ended June 30,2002. Computation of beginning of the year net assets GASB 34 requires that net assets be presented on government wide financial statements in the following categories, investment in capital assets, net of related debt, restricted and unrestricted. Our deliverable will include the development of a template which calculates these balances as of June 30, 2001 that can be used at year end. Drafting of notes to the general purpose financial statements The new reporting model will require that additional disclosures be included in the notes to the general-purpose financial statements. Our deliverable for this project will be to draft these additional note disclosures based upon the June 30, 2001 financial statements and provide them to you in a word document. Preparation of pro-forma Government Wide Financial Statements We will prepare pro-forma government wide financial statements based upon the June 30,2001 financial statements. The statements to be included will be the statement of net assets and statement of activities.The statement of net assets will report on all of the non-fiduciary activities of the County and its component units.The statement of activities will report the degree to which the direct expenses of a given function or segment are offset by program revenues. All of this information will be provided to you on a template. Preparation of a preliminary Management's Discussion & Analysis We will prepare a preliminary management's discussion and analysis based upon the June 30,2001 general-purpose financial statements and the pro-forma government wide financial statements. Areas to be addressed in this report includes financial highlights, an overview of the financial statements, an analysis of the government wide financial statements,a discussion of budgetary highlights, and a discussion of capital asset and debt administration. The working papers for the engagement are the property of Cherry, Bekaert & Holland, L.L.P. and constitute confidential information. Except as discussed below, any requests for access to our working papers will be discussed with you prior to making them available to requesting parties. Our Finn,as well as all other major accounting firms,participates in a"peer review"program,covering our audit and accounting practices. This program requires that once every three years we subject our quality assurance practices to an examination by another accounting firm.As part of the process, the other firm will review a sample of our work. It is possible that the other firm for their review may select the work we perform for you. If it is, they are bound by professional standards to keep all information confidential.If you object to having the work we do for you reviewed by our peer reviewer, please notify us in writing. In the event we are requested or authorized by you or required by government regulation, subpoena, or other legal process to produce our working papers or our personnel as witnesses with respect to our engagement for you,you will, so long as we are not a party to the proceeding in which the information is sought,reimburse us for our professional time and expense, as well as the fees and expenses of our counsel, incurred in responding to such a request. If any dispute,controversy or claim arises in connection with the performance or breach of this agreement either party may,on written notice to the other party,request that the matter be mediated. Such mediation would be conducted by a mediator appointed by and pursuant to the Rules of the American Arbitration Association or such other neutral facilitator acceptable to both parties. Both parties would exert their best efforts to discuss with each other in good faith their respective positions in an attempt to finally resolve such dispute or controversy. If any dispute,controversy,or claim arising out of or in connection with the performance or breach of this agreement cannot be resolved by mediation,then the dispute,controversy,or claim would be settled by arbitration in accordance with the rules of the American Arbitration Association(AAA)for the Resolution of the Accounting Firm Disputes. The award issued by the arbitration panel may be confirmed in ajudgment by any federal or state court of competent jurisdiction. The charges for our work are based on the time spent,and calculated at our regular hourly rates in effect, from time to time, plus direct expenses. Our rates vary according to the degree of responsibility involved and the skill required. Our fee for services, including out of pocket expenses is estimated not to exceed $40,000. All invoices are payable within thirty days from invoice date.A service charge will be added to past due accounts equal to 1-112%per month(18%annually)on the previous month's balance less payments received during the month,with a minimum charge of$2.00 per month. If the foregoing is in accordance with your understanding, please sign the original of this letter in the space provided and returns it to us. Very truly yours, RRY, BEK7RT & HOLLAND, L.L.P. Eddie T. Burke, CPA Partner RESPONSE: This letter correctly sets forth the understanding of Orange County Signature: Title: