Logan County Board hears favorable audit results

[April 27, 2017]  LINCOLN -  On Thursday, April 13, 2017, when the Logan County Board held its monthly Workshop one featured topic was the recently returned audit for 2015/2016; and its single audit report on the internal control over financial reporting and compliance related to Government Auditing Standards.

Adam Pulley of Clifton, Larson, and Allen, the company that conducted the audits, briefly shared the audit results with the board. He handed out a packet that showed the analysis of the financial statements and gave a brief overview of the county's finances.

Pulley said the packet included "a letter of governance on the adjusting entries made to the audit," a "management letter with a couple of points of recommendation," and a "single audit report which was over the federal programs."

Pulley said once again his firm has "issued an unmodified audit opinion on the financial statements. This basically means it is a clean opinion. It's the best opinion we can give the county on the financials. What you are looking at, you can feel good about. "

Pulley said the "single audit report over the federal grant programs" also received an "unmodified or clean opinion." He said, "There are five findings that we had [and] they are all repeats from prior years. They are not uncommon findings."

Pulley said, "Three of them are specific to the financial statements. These would be the fact that we help the county put together the financial statements [and] because we are external auditors and not a part of the internal control of the county, we have to note that as a finding of the county themselves."

Pulley said, "The other two findings we had were over the federal grant program specifically and these were both items that we had noted last year. I don't know that I would consider them items themselves. They are really just opportunities to strengthen controls."

Pulley said, "Both of them are in the health departmen" and "we discussed [them] with the health department." He said, "when it comes to determining eligibility for the WIC program, not all of the information was on the intake forms being signed-off on. We just reminded the health department to tighten controls around that."

Pulley said, "In our testing of costs and salaries, we noted that there was $16 that was overcharged to the grant program."

Pulley said, "We came across a couple of items in the county motor fuel tax fund that should have been recorded differently in a prior year. Because they were identified this year, we made prior period adjustments to the statements in this fund so that the fund balance was brought to where it should be."

Pulley said, the reported fund balance was "$3.4 million at the end of last fiscal year" and "there was one adjustment for an intergovernmental receivable." He said, "What had happened was, the highway department received a receipt for $95,000 that they deposited into the township motor fuel tax fund and it actually belonged in the county motor fuel tax fund."

Pulley said, "The motor fuel tax fund should have been $95,000 higher than last year. It has been corrected in this year, so going forward, the fund balance is accurate."

Pulley said, there was an $80,000 amount that showed up as deferred because "in a prior year, we had received a receipt that at the time we believed had some time restrictions" so it "could not be recognized as revenue last year."

Pulley said, "Come to find out in discussions with the state, there are no restrictions. Once the county received it last year, it was okay to recognize as revenue, so that should have been recognized revenue in the prior year." He said, "it was caught and it was corrected this year."

Pulley said, as a result of these corrections, the county motor fuel tax fund and the county as a whole are $76,000 or so higher in terms of fund balance.

Pulley said, countywide "cash and cash equivalents" which include ETSB "increased from $4.4 million at the end of last year to almost $5 million at the end of this year."

Pulley said receivables for the county as a whole "went down a little bit. We did see this at other counties we had audited as well. Basically the state is a little more caught up than what they were in prior years in terms of payments to the county, so the county does not have as big of a receivable balance sitting out there as of year end."

Pulley said, "Of the $5.6 million at year end, $4.1 [million] of that is actually property tax receivables."

Pulley said the liability side with "notes, leases, and bonds went down a little bit." It represents the county paying down its existing debt on the long term debt.

Pulley said, other liabilities "jumped up a lot" and "largely represents" many "pension changes and the recognition of how pension liabilities get shown." He reminded the board liabilities had jumped last year for that reason.

Pulley said, the reason it jumped this year is "there were a lot of changes in the actuarial assumptions. Essentially, what IMRF thought they were going to be making in terms of projected investments ended up being a lot less, and so contributions that were made into the pension plan were not enough to really cover that offset" He said, "the liability has increased," but does not find it alarming. It will just need to be monitored.

Pulley said the equity of the county as a whole decreased from $18.2 million to about $16.8 million. He said the "majority of that decrease" was connected to the "pension liability" which "hit the county's net position as a whole."

Income statements showed a bit of a decrease. Pulley said income taxes decreased from "$1.4 million in 2015 to $1.3 million in 2016," and said that amount was similar to the level in 2014. Sales taxes also decreased a little bit from $1.9 million to $1.7 million.

Pulley said user charges, fees, fines, and other miscellaneous revenues increased from $4.3 million to $4.56 million.

Pulley said for grants, both operating and capital decreased. He said grant activity is going down at various municipalities and "in the county's case, there were some donated vehicles from IDOT that were received last year" and that "contributed to the decrease in grants."

Pulley said total expenditures for the county increased by "a little over a million dollars" primarily due to the "pension liability" reflected in expenditures.

Pulley said for governmental funds, balances increased from 2015 to 2016 going from "$10.17 million to $10.21 million." He said the restatement of $176,000 in adjustments are the "reason the fund balances went up" and the county actually "experienced a bit of a decrease" in total fund balances of $133,000.

Pulley said the unassigned fund balance in the general fund decreased from "$1.7 million in 2015 to 1.5 million in 2016."

Pulley said the management letter made a few "recommendations" but were considered "material weaknesses" or "deficiencies." They were just areas for potential strengthening.

Pulley said he wanted to touch on credit cards because they are "a higher area of risk." He said they tested for "support of purchases within the monthly statement" and whether there were "controls in place with somebody reviewing those credit card purchases."

Pulley said they found "purchases that did not have supporting documentation." He said the recommendation is "to review who has the credit card" and look at "the control processes in place to make sure somebody is reviewing those that is not the same person initiating those purchases." Pulley said it would help "mitigate any risks there."

Pulley said the letter to governance shows the audit adjustments. He said this letter is "where we would note any significant disagreements with management and any significant issues we came across during the audit. Happy to say that there were none, so there is nothing to report there."

Pulley thanked Treasurer Vicki Dugan and other department heads for working hard to help make the audit process "as smooth as possible."

Finance Committee Chairman David Hepler made a motion that the board accept the Clifton, Larson, and Allen audit for 2016.

Board Chairman Chuck Ruben thanked Pulley and said Clifton, Larson, and Allen has "been wonderful to work with over the years."

Guests included Adam Pulley, Steve Carone, and Lindsay Stamp of Clifton, Larson, and Allen public accounting firm, and County Treasurer Vicki Dugan, and Penny Thomas from the Treasurer's Office.

The board will vote on approval of the audit at Tuesday's Regular Board meeting.

[Angela Reiners]