2016 audit results - lane county · • management’s judgments and accounting estimates are based...

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Lane County

DECEMBER8,2016

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FINANCE & AUDIT COMMITTEE DECEMBER 8, 2016

LANE COUNTYDear finance & audit committee members:

Thank you again for your continued engagement of Moss Adams. We are pleased tomeet with you to discuss the results of our audit of Lane County, Oregon’s financialstatements, federal program compliance, and state compliance for the year ended June30, 2016.

The accompanying report, intended solely for the use of the finance & audit committee,presents important information regarding the County‘s financial statements that webelieve will be of interest to you.

We conducted our audit with the objectivity and independence you expect. We receivedthe full support and assistance of the County’s personnel. We are pleased to serve andbe associated with the County, and we look forward to our continued relationship.

Sincerely,

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AGENDA

• Engagement Team• Nature of Services Provided• Auditor Opinions/Reports• Significant Audit Areas• Communication with Those Charged with Governance• Results of Tax Levy Engagement• Accounting Update

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ENGAGEMENT TEAM

• Kevin Mullerleile, CPA, Senior Managero [email protected] (541) 225‐6022

• Jim Lanzarotta, CPA, Partnero [email protected] (541) 225‐6070

• Amanda Moore, CPA, Partnero [email protected] (541) 732‐3865

• Meagan Rammell, CPA, Senioro [email protected] (541)225‐6086

• Brad Jones, Senioro [email protected] (541) 225‐6030

• Billy Brice, Staffo [email protected] (541) 225‐6044

• Kevin Walters, Staffo [email protected] (541) 225‐6080

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NATURE OF SERVICES PROVIDED

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Audit the County’s financial statements (with reliance on other auditor for HACSA) in accordance with GAAS and GAGAS

Compliance testing/reporting under Oregon Minimum Audit Standards

Assistance with, and technical review of, the CAFR for compliance with GAAP as well as GFOA Certificate of Excellence requirements

Single Audit of federal grant programs under Uniform Guidance

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Examination for Local Option Levy

Reporting ‐ Overall audit plan, audit results, communicating internal controls findings and noncompliance

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Consulting Projects

(1) Observed Finance Director interviews(2) Quantified loss of Sheriff’s Office theft

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AUDITOR OPINIONS & REPORTS

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AUDITOR REPORT ON THE FINANCIAL STATEMENT

Unmodified Opinion• Financial statements are presented fairly and in accordance with US GAAP

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OTHER AUDITOR REPORTSGAGASReporton InternalControlOverFinancialReportingandonCompliance and OtherMatters

Report on Compliance with Requirements that could have a Direct and Material Effect on the Major Federal Programs and on Internal Control Over Compliance in accordance with the Uniform Guidance for Federal Awards (2 CFR Part 200)

• No control findings

• No compliance findings

• No financial reporting findings


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OTHER AUDITOR REPORTS

ReportonComplianceandOtherMatters basedonanauditoffinancialstatementsinaccordancewithOregonMinimumStandards


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SIGNIFICANT AUDIT AREAS

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Audit Area Procedures Results

Cash and Investments

ConfirmationsInvestment valuation testing Oregon legal compliance testing

Balances properly supported and reported –Recommendations provided to Sheriff’s Office following theft

Revenue and Receivables

Review of contractsSubsequent receiptsDetail testing

Revenue/receivable materially correct

Capital Assets Review of County’s valuationsTesting additionsAnalytical tests of depreciationReview of GASB 51 intangibleassets policies & procedures

Capital assets materiallycorrect

Accounts Payable

Subsequent disbursementsTrace to supporting docsControl testingTesting approvals and coding

Accounts payable materially correct


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Accrued Liabilities, including PERS & OPEB

Review of managementanalysis, testing of assumptions

Management adequately supported estimates and consistently applied, reported balances agreed with underlying support

Long Term Debt Testing of payments and interest

Debt transactions were supported by underlying agreements, in compliance with applicable laws

Net PositionFund Balance

Review of board minutes, testing management’s support

Net position/fund balance classifications adequately supported

Grants Testing of the SEFA,Uniform Guidance procedures

SEFA materially correct, no compliance issues identified


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Oregon Minimum Standards

Specific testing of certain ORS requirements affecting the County

County found to be in compliance

Financial Close and Reporting

Completing disclosure checklists, testing year‐end close, CAFR

County met its delivery timelines and CAFR only required minor changes following our review

Fraud Fraud inquiries with personnelTesting of journal entries

Additional work was conducted at Sheriff’s Office following theft


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COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE

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COMMUNICATION WITH GOVERNING BODY

PlannedScopeandTimingoftheAudit

Itistheauditor’sresponsibilitytodeterminetheoverallauditstrategyandtheauditplan,includingthenature,timingandextentofproceduresnecessarytoobtainsufficientappropriateauditevidenceandtocommunicatewiththosechargedwithgovernanceanoverviewoftheplannedscopeandtimingoftheaudit.

• TheplannedscopeandtimingoftheauditwascommunicatedtotheCounty‘sfinance&auditcommitteeattheauditentrancemeetingonAugust18,2016.

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SignificantAccountingPoliciesandUnusualTransactions

Theauditorshoulddeterminethatthefinance&auditcommitteeisinformedabouttheinitialselectionofandchangesinsignificantaccountingpoliciesortheirapplication.Theauditorshouldalsodeterminethatthefinance&auditcommitteeisinformedaboutthemethodsusedtoaccountforsignificantunusualtransactionsandtheeffectofsignificantaccountingpoliciesincontroversialoremergingareasforwhichthereisalackofauthoritativeguidanceorconsensus.

• Managementhastheresponsibilityforselectionanduseofappropriateaccountingpolicies.ThesignificantaccountingpoliciesusedbytheCountyaredescribedinthefootnotestothefinancialstatements.Throughoutthecourseofanaudit,wereviewchanges,ifany,tosignificantaccountingpoliciesortheirapplication,andtheinitialselectionandimplementationofnewpolicies.TherewerenochangestosignificantaccountingpoliciesfortheyearendedJune30,2016.

• Webelievemanagementhasselectedandappliedsignificantaccountingpoliciesappropriatelyandconsistentwiththoseoftheprioryear.

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ManagementJudgmentsandAccountingEstimates

Thefinance&auditcommitteeshouldbeinformedabouttheprocessusedbymanagementinformulatingparticularlysensitiveaccountingestimatesandaboutthebasisfortheauditor’sconclusionsregardingthereasonablenessofthoseestimates.

• Management’sjudgmentsandaccountingestimatesarebasedonknowledgeandexperienceaboutpastandcurrenteventsandassumptionsaboutfutureevents.Weapplyauditprocedurestomanagement’sestimatestoascertainwhethertheestimatesarereasonableunderthecircumstancesanddonotmateriallymisstatethefinancialstatements.

• Significantmanagementestimatesimpactingthefinancialstatementsincludethefollowing:Usefullivesofcapitalassets,allowancesfordoubtfulaccounts,andestimatedliabilitiesforclaimsandjudgments,OPEB,andPERS.

• Wedeemedthemtobereasonable.

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ManagementJudgmentsandAccountingEstimates(Continued)

Ourviewsaboutqualitativeaspectsoftheentity’ssignificantaccountingpractices,includingaccountingpolicies,accountingestimates,andfinancialstatementdisclosures

• Thedisclosuresinthefinancialstatementsareclearandconsistent.Certainfinancialstatementdisclosuresareparticularlysensitivebecauseoftheirsignificancetofinancialstatementusers.Themostsensitiveestimatesaffectingthefinancialstatementdisclosuresarepensionsandotherpostemploymentbenefitobligations.

• Wedeemedthemtobereasonable.

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DifficultiesEncounteredinPerformingtheAudit

Thefinance&auditcommitteeshouldbeinformedofanysignificantdifficultiesencounteredindealingwithmanagementrelatedtotheperformanceoftheaudit.

• Wearepleasedtoreportthattherewerenodifficultiesencounteredduringtheaudit

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SignificantAuditAdjustmentsandUnadjustedDifferencesConsideredbyManagementtobeImmaterial

Thefinance&auditcommitteeshouldbeinformedofallsignificantauditadjustmentsarisingfromtheaudit.ConsiderationshouldbegiventowhetheranadjustmentisindicativeofasignificantdeficiencyoramaterialweaknessintheCounty’sinternalcontroloverfinancialreporting,orinitsprocessforreportinginterimfinancialinformation,thatcouldcausefuturefinancialstatementstobemateriallymisstated.

Thefinance&auditcommitteeshouldalsobeinformedofuncorrectedmisstatementsaggregatedbyusduringthecurrentengagementandpertainingtothelatestperiodpresentedthatweredeterminedbymanagementtobeimmaterial,bothindividuallyandintheaggregate,tothefinancialstatementstakenasawhole.

PassedAdjustments‐ County

• None

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PotentialEffectontheFinancialStatementsofAnySignificantRisksandExposures

Thefinance&auditcommitteeshouldbeadequatelyinformedofthemajorrisksandexposuresfacingtheCounty.

DisagreementsWithManagement

Disagreementswithmanagement,whetherornotsatisfactorilyresolved,aboutmattersthatindividuallyorintheaggregatecouldbesignificanttotheCounty’sfinancialstatements,ortheauditor’sreport.

• TheCountyissubjecttopotentiallegalproceedingsandclaimsthatariseintheordinarycourseofbusiness.

• Wearepleasedtoreportthattherewerenodisagreementswithmanagement.

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DeficienciesinInternalControl

Anymaterialweaknessesandsignificantdeficienciesinthedesignoroperationofinternalcontrolthatcametotheauditor’sattentionduringtheauditmustbereportedtothefinance&auditcommittee.

FINANCIALSTATEMENTS

• MaterialweaknessNonenoted

• SignificantdeficiencyNonenoted

FEDERALAWARDS

• Materialweakness(noncompliance)Nonenoted

• Significantdeficiency(noncompliance)Nonenoted

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Representationsrequestedofmanagement

Werequestedcertainrepresentationsfrommanagementthatareincludedinthemanagementrepresentationletter.

• Wewillreceivetherepresentationletterfrommanagementpriortoissuingourreports.

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Management’sconsultationwithotheraccountants

Insomecases,managementmaydecidetoconsultaboutauditingandaccountingmatters.IfmanagementhasconsultedwithotheraccountantsaboutanauditingandaccountingmatterthatinvolvesapplicationofanaccountingprincipletotheCounty’sfinancialstatementsoradeterminationofthetypeofauditor'sopinionthatmaybeexpressedonthosestatements,ourprofessionalstandardsrequiretheconsultingaccountanttocheckwithustodeterminethattheconsultanthasalltherelevantfacts.

• Wearenotawareofanysignificantaccountingorauditingmattersforwhichmanagementconsultedwithotheraccountants.

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OtherMaterialWrittenCommunications

ReporttotheFinance&AuditCommitteesignificantwrittencommunicationsbetweentheauditorandclientmanagement.

MaterialUncertaintiesRelatedtoEventsandConditions(specificallygoingconcernissues)

Anydoubtregardingtheentity’sabilitytocontinue,asagoingconcern,shouldbecommunicatedtotheauditcommittee.

• Otherthantheauditcontract,managementrepresentationletterandcommunicationofthosechargedwithgovernance,therehavebeennoothersignificantcommunications.

• Nosuchmatterscametoourattention.

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FraudandIllegalActs

Fraudinvolvingseniormanagementandfraud(whethercausedbyseniormanagementorotheremployees)thatcausesamaterialmisstatementofthefinancialstatementsshouldbecommunicated.Wearealsorequiredtocommunicateanyillegalactsinvolvingseniormanagementthatcometoourattention,unlessclearlyinconsequential.

• Wehavenotbecomeawareofanyinstancesoffraudorillegalacts,exceptfortheSheriff’sOfficetheft,whichtheCountyhasinvestigatedandprosecuted.

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RESULTS OF TAX LEVY ENGAGEMENT

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• CLEAN OPINION

o Local Option Levy Tax Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance

o County’s Assertions in the Jail and Youth Services Operating Report

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• Continued use of special revenue fund

• Methodologies in place to allocate shared expenses for levy funded programs

Local Option Levy Tax Fund created

• Budget and financial reporting systems include Dept ID coding for community corrections

• General Fund reported current year Sheriff’s Office expenditures

Continued appropriation of General Fund dollars for jail

service funding

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• Tax levy funds spent on adult jail beds

• Observed 256 adult jail beds in operation

• Counts are performed regularly

At least 255 local adult jail beds were operated during

FYE 2016

• Tax levy funds spent on critical youth services

• Observed 16 detention and 16 treatment beds in operation

• Counts are performed regularly

At least 16 youth detention beds and 16 youth treatment beds were operated during

FYE 2016

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• County’s budget followed prescribed tax levy allocation

• Sampled journal entries for proper allocation of tax levy funds

Tax levy allocated 91% to jail operations and 9% to critical

youth services

• County implemented controls over the financial closing and reporting of the fund

• Audit procedures did not identify audit adjustments

Local Option Levy Fund received an unmodified opinion in the FYE 2016 financial statement audit.

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ACCOUNTING UPDATE

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NEW STANDARDS

• GASBStatementNo.74,FinancialReportingforPostemploymentBenefitPlansOtherthanPensionPlans

• GASBStatementNo.75,AccountingandFinancialReportingforPostemploymentBenefitsOtherThanPensions

• GASBStatementNo.77,TaxAbatementDisclosures

• GASBStatementNo.78,PensionsProvidedthroughCertainMultiple‐EmployerDefinedBenefitPensionPlans

• GASBStatementNo.80, BlendingRequirementsforCertainComponentUnits—anamendmentofGASBStatementNo.14

• GASBStatementNo.81,IrrevocableSplit‐InterestAgreements

• GASBStatementNo.82,PensionIssues—anamendmentofGASBStatementsNo.67,No.68,andNo.73

• GASBStatementNo.83,Certain AssetRetirementObligations

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WHAT HAS THE GASB BEEN UP TO?

• FiduciaryActivities– Todevelopguidanceregardingtheapplicationoffiduciaryresponsibilitycriteriaindecidingwhetherandhowgovernmentsshouldreportfiduciaryactivitiesintheirexternalfinancialreports

• Leases – Reexamineissuesrelatedtoleaseaccounting,determinationofwhetherleasesmeetthedefinitionofassetsorliabilities

• DebtExtinguishment– Lookstoupdatecertaindebtextinguishmentreporting

• Omnibus201X– IntendstoimproveconsistencyinaccountingandfinancialreportingbyaddressingpracticeissuesthathavebeenidentifiedduringimplementationandapplicationofcertainGASBstandards(blendingcomponentunits,goodwill,fairvaluemeasurementandapplication,andpostemploymentbenefits(pensionandotherpostemploymentbenefits))

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ACKNOWLEDGEMENTSThankstoJeanneSun,RobertTintle,GregRikhoff,ChristineMoody,andotherfinancestaff,andotherCountydepartmentsforassistance.

2016 audit results - lane county · • management’s judgments and accounting estimates are based...

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