Examiners Update to County Administrators Presented by: James E. Hall, CPA Director County Audit Division Examiners of Public Accounts State of Alabama

Disclaimer  This information was presented to the Association of County Commissions of Alabama’s (ACCA) Annual Conference on May 13,  This presentation represents the audit position of the Department of Examiners of Public Accounts as of that date.

Objectives…  GASB Statements  Common Problems  Financial Statements

GASB Updates

GASB FY2014  Statement No 67 – Financial Reporting for Pension Plans – An Amendment to GASB Statement No. 25  Statement No 70 – Accounting and Financial Reporting for Nonexchange Financial Guarantees

Statement No 70 – Accounting and Financial Reporting for Nonexchange Financial Guarantees  Applies to governments who guarantee the financial obligations of others in a nonexchange transaction  Other entities may include governments or authorities, not-for-profits, private companies and individuals  Must recognize a liability if it is more likely than not (more than 50%) that the government will be required to make a payment on the guarantee.

GASB 70 Note Disclosures Regardless of whether the governmental entity determines that it is more likely than not that a payment will be required, GASB requires the entity to make certain disclosures for all nonexchange financial guarantees.  A description of the nonexchange guarantee  The legal authority and limits for extending the guarantee and the types of obligations guaranteed  Relationship between guarantor and the entity issuing the obligations that are guaranteed  Description of recovery arrangements  Length of time of the guarantees  Total amounts of all guarantees extended that are outside of the reporting date.

GASB 70 Note Disclosure In addition to previous disclosures, governments that have recognized a liability or made payments during the year there are additional disclosures  Description of changes in recognized liabilities, including beginning and end of year balances, increases, decreases and adjustments  Discussion of timing of recognition & measurement  Amount of outstanding guarantees  Amount of commitments to extend guarantees  Cumulative amount paid towards outstanding guarantees  Amounts expected to be recovered

GASB 70 Note Disclosures Governments with obligations guaranteed by another entity in a nonexchange transactions should disclose the following:  Name of entity providing the guarantee  Amount of obligations guaranteed  Length of time of the guarantee  Amount paid by guarantor during the audit period  Cumulative amount paid by guarantor on outstanding obligations.  Description of requirements to repay  Outstanding amounts to be repaid to the guarantor

GASB FY2015  Statement No. 68 – Accounting and Financial Reporting for Pensions  Statement No. 69 – Government Combinations and Disposals of Government Operations

Statement No. 68 – Accounting and Financial Reporting for Pensions  Must report the net pension liability on the government-wide and enterprise fund type financial statements.

GASB Statement 69 Government Combinations and Disposals of Government Operations

GASB Statement 69 Government Combinations and Disposals of Operation  Statement identifies 3 types of combinations  Merger - assets and liabilities are recognized at their carrying value as of the merger date  Acquisition - assets and liabilities are recognized at acquisition cost as of the acquisition date, except for  Employee benefit arrangements  Landfill and pollution remediation liabilities  Investments and derivatives reported at fair value  Deferred Outflows and Deferred Inflows  Transfer of Operations – assets and liabilities are recognized at their carrying value as of the merger date

GASB Statement 69 Government Combinations and Disposals of Operation  Merger – combination of legally separate entities with no significant exchange of consideration and either  2 or more governments cease to exist as entities and are combined to form one or  A legally separate entity ceases to exist and the operations are absorbed into a continuing government

GASB Statement 69 Government Combinations and Disposals of Operation  Acquisitions – combination in which a government acquires another entity or operations of another entity in exchange for significant consideration  Transfer of Operations – Involves combination of operations rather and legally separate entities in which no significant consideration is exchanged  Can be a transfer of operations to a continuing government or a newly formed government.

Common Problems and Ways to Correct 16

Cash and Investments  Not making deposits in a timely manner.  Not performing bank reconciliations  Investing in items not authorized by the Code of Alabama 1975, Section and

Proper Procedures - Depositing  Funds should be deposited in a timely manner; daily – recommended.  If deposit cannot be made before the bank closes, a locked night deposit bag should be used to secure funds in the bank’s night depository.  Pre-printed, duplicate deposit slips containing the account name and bank account number should be used.

Proper Procedures - Depositing  Checks should be endorsed with “For Deposit Only”, along with account name and bank account number.  The deposit slip should contain the receipt numbers of the funds deposited.  The deposit date and deposit amount should be noted on the last receipt included in the deposit.

Proper Procedures - Depositing  Daily receipts should be deposited intact.  Do not cash checks with the funds received.  Do not use cash receipts for change cash.  Do not use cash received for expenses.  Do not use correction fluid or erase mistakes on deposit slips.  The bank should authenticate the duplicate deposit slip at the time of deposit and be retained for audit.

Receivables  Not recording receivables for amounts earned during the fiscal year but not received until the next fiscal year.  If in doubt of year end receivables, it is OK to make an estimate! 21

Inventories  Commission not recording any inventories when material amounts are on hand. Examples include road department supplies, gas, water treatment supplies, etc. 22

Capital Assets  Not performing a physical inventory at least once every 2 years (federal requirement)  Amounts recorded as Capital Outlay do not agree with additions to Capital Assets 23

Liabilities  Failure to record debt refundings or new debt issued  Improperly recording principal and interest payments  Payables subsidiary listing not agreeing with general ledger  Due to / Due From not agreeing 24

Revenues/ Receipts  Not reporting all income earned or received during the year.  Receipt books were not retained or made available for review.  Voided Receipts not being maintained. 25

Revenues/Receivables Proper Procedures  Voided receipts must be retained in the receipt book.  Do not use correction fluid or erase mistakes.  Secure funds received  Do not cash checks with funds received  No money should be left in office overnight  All receipts books should be logged and secured when not in use. 26

Payroll / Personnel  Not reporting vehicle usage as income on individual’s W-2 (IRS Pub 13b)  Personnel files not being updated.  Promotions/raises not indicated in files 27

Expenditures  Expenditures did not contain the proper supporting documentation.  Expenditures were not properly coded in the accounting system.  Failure to follow the Alabama Competitive Bid Law and/or the Alabama Public Works Law  Transfers In / Transfers Out not agreeing

Proper Procedures - Expenditures  Do not sign blank checks – must contain payee name and amount.  Do not pay for items in advance of receipt of materials, supplies, or equipment.  Invoices and supporting documents should be provided with the check to be signed.  Invoices should be cancelled (marked PAID) when the check is signed.

Proper Procedures - Expenditures  Vendors should be paid in a timely manner to avoid late fees.  Checks should be used in numerical order.  Checks must be secured at all times.  Voided checks must be retained for audit.  Checks outstanding for more than 60 days should be investigated.

Bid Law  Goods and Services in excess of $15,000 not being bid in accordance with Code of Alabama 1975, Section  Be very careful using credit cards and purchasing cards – still subject to bid law!  Not following all aspects of public works law

Contact Information Managers  Robin Lakey – Madison; Colbert; Franklin; Marion; Winston; Lawrence  Randy O’Bannon – Lauderdale; Limestone; Jackson; Morgan; Marshall; Cullman  Gwyn Griggs – DeKalb; Etowah; Cherokee; Calhoun; Cleburne  Whitney Atchison – Jefferson; St Clair; Blount; Walker; Fayette  Nikki Morrison – Shelby; Talladega; Clay; Coosa; Randolph; Tallapoosa  Shelley Patrenos – Lamar; Pickens; Tuscaloosa; Sumter; Greene; Hale 32

Contact Information Managers  Emily Tyler – Bibb; Perry; Dallas; Marengo; Choctaw  Teresa Dekle – Chilton; Autauga; Elmore; Lowndes; Montgomery  Tammy Shelley – Chambers; Lee; Macon; Russell; Barbour  Brian Wheeler – Mobile; Baldwin; Washington; Monroe  Christina Smith – Clarke; Wilcox; Conecuh; Escambia  Lynn Otto – Butler; Crenshaw; Covington; Coffee; Geneva  Cherie Raffle – Houston; Henry; Dale; Pike; Bullock 33

Managers Information is First Name.Last  Robin Lakey ( )  Randy O’Bannon ( )  Gwyn Griggs ( )  Whitney Atchison ( )  Nikki Morrison ( )  Shelley Patrenos ( )  Emily Tyler ( )  Teresa Dekle ( )  Tammy Shelley ( )  Brian Wheeler ( )  Christina Smith ( )  Lynn Otto ( )  Cherie Raffle ( ) 34

Contacting the Department Located in the Gordon Persons Administrative Building at 50 North Ripley Street, Room 3201 in Montgomery, AL Mailing Address – P. O. Box Montgomery, AL Phone – Fax – – Website –

Hotline  To report Fraud, Waste & Abuse: F-RAUD

Other Issues  Financial Statements…

Questions 38