HomeMy WebLinkAboutAgenda 02-06-24; 4-a - Presentation of Annual Comprehensive Financial Report for FYE 6-30-2023 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: February 6, 2024
Action Agenda
Item No. 4-a
SUBJECT: Presentation of Annual Comprehensive Financial Report for FYE 6/30/2023
DEPARTMENT: Finance and Administrative Services
ATTACHMENT(S): INFORMATION CONTACT:
1. GFOA Award for Excellence in Gary Donaldson, (919) 245-2453
Financial Reporting
2. PowerPoint Presentation - Mauldin &
Jenkins
UNDER SEPARATE COVER
3. Annual Comprehensive Financial
Report, June 30, 2023 - To Be
Provided at the Meeting
ALSO CURRENTL Y A VAILABLE A T.
http://www.co.orange.nc.us/732/Finan
cial-Audit
PURPOSE: To receive the Annual Comprehensive Financial Report (ACFR) for the fiscal year
ended June 30, 2023.
BACKGROUND: The ACFR reports on all financial activity of the County for the fiscal year July
1, 2022 through June 30, 2023. Mauldin and Jenkins, LLC, a firm of Certified Public Accountants,
audited the financial statements. The financial statements and audit are required by Chapter 159-
34 of the North Carolina General Statutes. The County prepares an Annual Comprehensive
Financial Report (ACFR) that meets the standards set by the Government Finance Officers
Association (GFOA). The ACFR is submitted to the GFOA in order to be awarded the Certificate
of Achievement for Excellence in Financial Reporting. The financial report for the Orange County
Sportsplex, as required under the management contract, is included in the County's ACFR.
The County received an unmodified (clean) audit opinion on the financial statements received
from the audit. The financial audit results indicate compliance with County financial policies. The
Chief Financial Officer and representatives of Mauldin and Jenkins, LLC will cover highlights of
the Report and answer any questions.
FINANCIAL IMPACT: The financial report indicates a strong financial position for Orange
County.
SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goal is applicable to
this item:
2
• GOAL: ENSURE ECONOMIC SELF-SUFFICIENCY
The creation and preservation of infrastructure, policies, programs and funding necessary
for residents to provide shelter, food, clothing and medical care for themselves and their
dependents.
ENVIRONMENTAL IMPACT: There is no Orange County Environmental Responsibility Goal
impact associated with this item.
RECOMMENDATION(S): The Manager recommends that the Board receive the Annual
Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2023.
3
Government Finance Officers Association
203 North LaSalle Street,Suite 2700
Chicago,Illinois 60601-1210
312.977.9700 fax: 312.977.4806
10/27/2023
Jamezetta Bedford
Board Chair
Orange County,North Carolina
Dear Jamezetta:
We are pleased to notify you that your annual comprehensive financial report for the fiscal year ended
June 30, 2022 qualifies for GFOA's Certificate of Achievement for Excellence in Financial Reporting.
The Certificate of Achievement is the highest form of recognition in governmental accounting and
financial reporting, and its attainment represents a significant accomplishment by a government and its
management.
When a Certificate of Achievement is awarded to a government, an Award of Financial Reporting
Achievement(AFRA)is also presented to the individual(s)or department designated by the government
as primarily responsible for its having earned the Certificate. This award has been sent to the submitter as
designated on the application.
We hope that you will arrange for a formal presentation of the Certificate and Award of Financial
Reporting Achievement, and give appropriate publicity to this notable achievement. A sample news
release is included to assist with this effort.
We hope that your example will encourage other government officials in their efforts to achieve and
maintain an appropriate standard of excellence in financial reporting.
Sincerely,
Michele Mark Levine
Director, Technical Services
4
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
Orange County
North Carolina
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2022
Executive Director/CEO
5
GOVERNMENT FINANCE OFFICERS ASSOCIATION
NEWS RELEASE
FOR IMMEDIATE RELEASE
10/27/2023 For more information contact:
Michele Mark Levine,Director/TSC
Phone: (312)977-9700
Fax: (312)977-4806
Email: mlevine@gfoa.org
(Chicago, Illinois)—Government Finance Officers Association of the United States and Canada (GFOA) has
awarded the Certificate of Achievement for Excellence in Financial Reporting to Orange County for its annual
comprehensive financial report for the fiscal year ended June 30, 2022. The report has been judged by an
impartial panel to meet the high standards of the program, which includes demonstrating a constructive "spirit
of full disclosure"to clearly communicate its financial story and motivate potential users and user groups to read
the report.
The Certificate of Achievement ig'the highest form of recognition in the area of governmental accounting and
financial reporting, and its attainment represents a significant accomplishment by a government and its
management.
Government Finance Officers Association(GFOA)advances excellence in governmentfinance by providing best
practices,professional development, resources, and practical research for more than 21,000 members and the
communities they serve.
203 NORTH LASALLE STREET, SUITE 2700, CHICAGO, ILLINOIS 60601-1210
Agglop-,mrp--
ORANGE COUNTY
NORTH CAROLINA
AAT Presentation of Audit Results
June 30,, 2023
AAT 7
Orange County, North Carolina
Agenda
Engagement Team
Overview of:
Audit Opinion
Financial Trends
Compliance Report
Required Communications
Accounting Recommendations and Related Matters
Answer Questions
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
AAT
8
Orange County, North Carolina
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Engagement Team Leaders
• Tim Lyons, Engagement Partner Brian Nicholson, Quality Review Partner I Chad Jackson, Sr. Associate
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
AAT
9
Orange County, North Carolina
Audit Opinion
• Our Responsibility Under Auditing Standards Generally Accepted in the United States of
America (GAAS)
We considered the internal control structure for the purpose of expressing our opinion on Orange County, North Carolina's
(the"County") basic financial statements, not for the purpose of providing an opinion on the effectiveness of internal controls.
Our audit was performed in accordance with GAAS and Government Auditing Standards.
Our objective is to provide reasonable—not absolute—assurance that the basic financial statements are free of material
misstatement.
The basic financial statements are the responsibility of the County's management.
We did not audit the financial statements of the Orange County ABC Board. The financial statements of the ABC Board were
audited by other auditors whose report was furnished to us, along with certain other required communications. Our opinion
on the County's financial statements is based solely on the report of the other auditors who performed the audit of the ABC
Board. The financial statements of the ABC Board were not audited in accordance with Government Auditing Standards.
• Report on Basic Financial Statements
Unmodified ("clean") opinion on basic financial statements.
Presented fairly in accordance with accounting principles generally accepted in the United States of America.
Our responsibility does not extend beyond financial information contained in our report.
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
A T
10
Orange County, North Carolina
Compliance Report and Audit Scopes & Procedures
• Government Auditing Standards ("Yellow Book") Report
The financial report package contains a report on our tests of the County's internal controls and compliance
with laws, regulations, etc. The report is not intended to provide an opinion on internal controls nor is it
intended to provide a legal determination on the County's compliance with applicable laws and regulations.
This report and the procedures performed are required by Government Auditing Standards.
• Compliance Reports
We were required to perform Single Audit procedures on six (6) major programs (4 Federal and 2 State of
North Carolina programs).
We issued a report on the County's federal programs in accordance with the Uniform Guidance. That report
contained an unmodified opinion on compliance.
We issued a report on the County's state programs in accordance with the State of North Carolina Single
Audit Implementation Act. That report contained an unmodified opinion on compliance.
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
AAT
11
Orange County, North Carolina
Financial Trends - Composition of Fund Balance
Trends from 2022 to 2023
Fund Balance Categories - General Fund Li 2022 Fund Balance: $81.3M
50,000,000 Li 2023 Fund Balance: $80.4M
45,000,000
Increase to unassigned fund
40,000,000 balance of approximately
35,000,000
$4.4 million — mostly related
30,000,000 to the decrease in assigned
25,000,000 (appropriated in subsequent
20,000,000 period).
15,000,000
Li Increase to restricted fund
10,000,000
balance of approximately
5,000,000 — ® , , $1.6M.
2021 2022 2023 ❑ Unassigned fund balance as
of June 30, 2023, is 17.2% of
■ Nonspendable ■ Restricted ■ Committed ■Assigned ■ Unassigned General Fund + Debt Svc.
Fund expenditures.
Auditor's Discussion &Analysis (AD&A)
June 30, 2023
A T
12
Orange County, North Carolina
Financial Trends - General Fund Revenue
Other, 1.6%
Charges for services, 5.2%
Intergovernmental, 7.2%
Sales Taxes,
16.1%
Property Taxes,
69.9%
2023 2022 Diff
Property Taxes 188,249,567 181,453,366 6,796,201
Sales Taxes 43,396,780 37,996,379 5,400,401
Intergovernmental 19,363,115 20,573,198 (1,210,083)
Charges for services 14,035,772 13,755,859 279,913
Other 4,195,050 2,719,876 1,475,174
269,240,284 256,498,678 12,741,606
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
AAT
13
Orange County, North Carolina
Financial Trends - General Fund Expenditures
2023 2022 Diff % age
Community services 14,595,312 13,205,403 1 ,389,909 6%
General government 13,103,299 10,770,606 2,332,693 5%
Public safety 33,434,999 27,822,848 5,612,151 13%
Human Services 38,758,538 39,736,328 (977,790) 15%
Education 97,969,758 94,916,033 3,053,725 39%
Support services 11 ,805,338 12,461 ,128 (655,790) 5%
Debt service (*) 41 ,750,825 43,304,765 (1 ,553,940) 17%
251 ,418,069 242,217,111 9,200,958 100%
* Debt service expenditures includes approximately $21.7 million of principal and interest payinents on
school-related debt for the fiscal year ended June 30, 2023. When the balance of those payments is added
to non-debt service, total expenditures for education total approximately $119.7 million or 48% of total
General Fund + Debt Service Fund expenditures.
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
14
Orange County, North Carolina
Financial Trends - Proprietary Funds
Solid Waste Enterprise Fund
2023 2022 Change
Operating revenues $ 11,001,798 $ 11,337,901 $ (336,103)
Operating expenses 9,430,416 10,019,577 (589,161)
Operating income 1,571,382 1,318,324 253,058
Unrestricted net position 9,696,271 7,645,336 2,050,935
Operating cash flow 1,277,803 4,209,250 (2,931,447)
Overall cash flow (502,536) 2,169,292 (2,671,828)
SportsPlex Enterprise Fund
2023 2022 Change
Operating revenues $ 4,769,351 $ 3,835,429 $ 933,922
Operating expenses 4,117,559 3,897,155 220,404
Operating income 651,792 (61,726) 713,518
Unrestricted net position 647,736 344,385 303,351
Operating cash flow 1,116,326 977,972 138,354
Interfund transfers - 790,000 (790,000)
Overall cash flow 374,190 1,160,769 (786,579)
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
A T
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Orange County, North Carolina
Required Communications
• Significant Accounting Policies
Management is responsible for the selection and use of appropriate accounting policies.
The significant accounting policies used by the County are described in Note 1 to the basic financial statements.
During the current year, the County implemented Governmental Accounting Standards Board (GASB) Statement
No. 96, Subscription-Based Information Technology Arrangements.
The policies used by the County are in accordance with generally accepted accounting principles.
In considering the qualitative aspects of its policies, the County is not involved in any controversial or emerging
issues for which guidance is not available.
• Management judgment/Accounting Estimates
Accounting estimates are an integral part of the financial statements prepared by management and are based on
management's knowledge and experience about past and current events and assumptions about future events.
The County uses various estimates as part of its financial reporting process - including actuarial assumptions.
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
A T
16
Orange County, North Carolina
Required Communications (Continued)
• Relationship with Management
We received full cooperation from the County's management and staff.
There were no disagreements with management on accounting issues or financial reporting matters.
Management Representation
We requested, and received, written representations from management relating to the accuracy of information
included in the financial statements and the completeness and accuracy of various information requested by us.
• Consultation with Other Accountants
To the best of our knowledge, management has not consulted with, or obtained opinions from, other independent
accountants during the year, nor did we face any issues requiring outside consultation.
• Significant Issues Discussed with Management
• There were no significant issues discussed with management related to business conditions, plans, or strategies
that may have affected the risk of material misstatement of the financial statements.
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
A T
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Orange County, North Carolina
Required Communications (Continued)
• Audit Adjustments
Several adjustments were required during the conduct of the audit; these adjustments have been provided to
management and they have provided us with representations that the adjustments have been posted to the
County's general ledger.
We did not have any passed audit adjustments.
• Financial Statement Disclosures
The footnote disclosures to the financial statements are also an integral part of the financial statements and the
process used by management to accumulate the information included in the disclosures was the same process
used in accumulating the statements. The overall neutrality, consistency, and clarity of the disclosures was
considered as part of our audit.
• Information in Documents Containing Audited Financial Statements
Our responsibility for other information in documents containing the County's basic financial statements and our
report thereon does not extend beyond the information identified in our report. If you intend to publish or
otherwise reproduce the financial statements and make reference to our firm, we must be provided with printers'
proof for our review and approval before printing. You must also provide us with a copy of the final reproduced
material for our approval before it is distributed.
• Auditor Independence
In accordance with AICPA professional standards, M&J is independent with regard to the County, its component
unit, and its respective financial reporting processes.
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
A T
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Orange County, North Carolina
Audit Finding
• 2023-001 Reporting of Employee Costs to NCDHHS
In our testing of employee costs charged to the Medicaid and SNAP programs, we noted four (4) total instances
(three (3) out of forty (40) for Medicaid and one (1) out of forty (40) for SNAP) where the employee's day sheet
(where time is tracked by service code in 6-minute increments) included more time than the employee's approved
timesheet for the week.
No questioned costs noted.
Management Points (Recommendations)
• Capitalization Thresholds for Right-to-Use Assets
Over the last two (2) fiscal periods, the County was required to implement the provisions of two (2) new accounting
standards (GASB Statement No. 87, Leases and GASB Statement No. 96, Subscription-based Information Technology
Arrangements) that have significantly changed the way local governments account for leasing activities and
information technology (IT) contracts. These new standards have created a new class of asset that is recorded in
the County's statement of net position known as a "right-to-use" asset. Similar to capital assets, these right-to-use
assets are capitalized and amortized over the life of the underlying agreement(s) or underlying asset's useful life
(whichever is shorter). We recommend the County adopt a capitalization threshold for recording right-to-use assets
in the same way that the County has a capitalization threshold for recording tangible capital assets. Establishing a
threshold will make it easier for the County to more efficiently evaluate agreements that could give rise to the
recording of right-to-use assets and eliminate what could be time spent on items that are immaterial to the County's
financial statements.
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
AAT
19
Orange County, North Carolina
Management Points (Recommendations)
• County Reimbursement for Sales Taxes Paid
During our testing of the amounts received by the County from the North Carolina Department of Revenue
(NCDOR) during the fiscal year ended June 30, 2023, we noted the County did not receive a reimbursement of sales
taxes previously paid. Based on our discussion with management of the County, the NCDOR submittal is normally a
part of year-end processing that has been delayed such that the County has not received these funds from NCDOR
yet. Management is in the process of preparing the application for reimbursement that is required to be sent to
NCDOR before the funds are released. Additionally, we have noted that management has implemented additional
internal controls to ensure this is not overlooked during the annual closeout process in future fiscal years.
• Accounting for Special Revenue Funds
During our review of the County's financial statements, we noted the DSS Payee Fund did not have any revenue or
expenditure activity for the fiscal year under audit. Based on our review of the general ledger activity, it appears the
County is still accounting for this fund as if it was still a custodial fund of the County where all amounts are received
as cash and offset with a corresponding liability. With the change in accounting standard that was brought about by
GASB Statement No. 84, Fiduciary Activities, this fund was reclassified to a special revenue fund in previous years and
should be reflecting the inflows it receives during the fiscal year as revenues and conversely, the outflows as
expenditures. Due to the fact that the activity for the fiscal year ended June 30, 2023, was not material, an audit
adjustment to reclassify the activity was not required. However, we recommend County staff implement additional
internal controls or additional annual closeout procedures to the ensure the amounts are properly recorded in
accordance with generally accepted accounting principles (GAAP).
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
AAT
20
_40W� Orange County, North Carolina
New Accounting Pronouncements
• New GASB Pronouncements for Future Years
Statement No. 101, Compensated Absences was issued in June 2022 and is effective for fiscal years beginning after
December 15, 2023, which means the County's fiscal year ended June 30, 2025.
• Current / Pending Major GASB Projects
• Re-Examination of the Financial Reporting Model. GASB has added this project to its technical agenda to make
improvements to the existing financial reporting model (established via GASB issued Statement No. 34). Improvements are
meant to enhance the effectiveness of the model in providing information for decision-making and assessing a government's
accountability.
• Revenue and Expense Recognition is another long-term project where the GASB is working to develop a comprehensive
application model for recognition of revenues and expenses from non-exchange, exchange, and exchange-like transactions.
• Going Concern Uncertainties and Severe Financial Stress is major project where the goal is to address issues related to
disclosures regarding going concern uncertainties and severe financial stress. This technical topic is being examined by the GASB
due to a wide diversity in practice regarding required presentation on the face of the financial statements, disclosures, etc.
■ Disclosures Related to Capital Assets is a project the GASB added to its agenda this year as a result of the new class of assets
("right-to-use" assets) from the new standards (GASB 87, 94 and 96). The exposure draft proposes new guidance regarding the
disclosure of certain items related to capital assets.
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
AAT
21
Orange County, North Carolina
Govt. Clients - Free Quarterly Continuing Education
• Since March of 2009 - For Over 12 Years !!
Mauldin &Jenkins provides free quarterly continuing education for all of our governmental clients. Topics are tailored to be
of interest to governmental entities. In an effort to accommodate our entire governmental client base, we offer the sessions
several times per quarter at a variety of client provided locations resulting in greater networking and knowledge sharing
among our governmental clients. We normally see approximately 180 people per quarter. Examples of subjects addressed in
the past few quarters include:
• Accounting for Debt Issuances ■ GASB Projects & Updates (ongoing & several sessions
• Achieving Excellence in Financial Reporting ■ Human Capital Management
■ Best Budgeting Practices, Policies and Processes ■ Grant Accounting Processes and Controls
■ Budget Preparation ■ Internal Controls Over Accounts Payable, Payroll and
• ACFR Preparation (two (2) day hands-on course) Cash Disbursements
• Capital Asset Accounting Processes and Controls ■ Internal Controls Over Receivables &the Revenue Cycle
• Collateralization of Deposits and Investments ■ IRS Issues, Primarily Payroll Matters
■ Component Units ■ Legal Considerations for Debt Issuances & Disclosures
• Cybersecurity Risk Management ■ Policies and Procedures Manuals
■ Evaluating Financial and Non-Financial Health of a Govt. ■ Segregation of Duties
• Financial Report Card -Where Does Your Govt. Stand? ■ Single Audits for Auditees
■ Financial Reporting Model Improvements ■ Special Purpose Local Option Sales Tax(SPLOST)
■ GASB Nos. 74&75, OPEB Standards ■ Accounting, Reporting & Compliance
■ GASB No. 77, Tax Abatement Disclosures ■ Uniform Grant Reporting Requirements and the New
■ GASB No. 84, Fiduciary Activities Single Audit
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
A T
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Orange County, North Carolina
Governmental Advisory Services
Core Offerings
Operational
Efficiency
m
F F F
Effectiveness I
Develops and defines the Ensures business processes Allows for the successful Ensures outputs and
future vision,goals,and and service delivery are change from the current outcomes are producing
objectives provided in a manner state to the desired desired results
maximizing targeted goals environment or outcome
• Innovation
• Long-Term Planning • Cost Containment • Change Management and • Budget Forecasting&Design
• Orga n izatio n M 2 n agement • Operations Improvement Organizational Transformation • Cost Accounting
• Workforce of the Future Planning • Program Delivery Strategies . Data Science
• Internet of Things/Market Disruptors • Revenue Enhancement • Customer Service Optimization . Grant Strategy
Assessment • Staffing Assessments • Service Delivery Modeling • Risk Assessments
• Artificial Intelligence/Robotics • Benchmarking • Tech nology/Workflow Design • Internal Controls&Compliance
• Service Delivery Model Planning • Technology Utilization • Human Capital Management • KPI Design
• Strategy Mapping • Governance • Benchmarking
• Technology Consulti ng/ERP • Policy/Procedure Assessments • Project Management
• Technology Solution/Vendor Selection • Operations/Management Reviews • Independent Verification&Validation
• Operational Vision • Management/Dashboard Reporting
• Business Case
Auditor's Discussion &Analysis (AD&A) Going Further.
June 30, 2023
Questions & Comments 23
OP*.AANGE COUNTY
NORTH CAROLINA
TXA -7- Thank You for the Opportunity to Serve