ottawa County Financial Report For the fiscal year ended June 30, 2018  OTTAWA COUNTY, OKLAHOMA FINANCIAL STATEMENT AND INDEPENDENT AUDITOR'S REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2018 This publication, issued by the Oklahoma State Auditor and Inspector’s Office as authorized by 19 O.S. § 171, has not been printed, but is available on the agency’s website (www.sai.ok.gov) and in the Oklahoma Department of Libraries Publications Clearinghouse Digital Prairie Collection (http://digitalprairie.ok.gov/cdm/search/collection/audits/) pursuant to 65 O.S. § 3-114. January 18, 2023 TO THE CITIZENS OF OTTAWA COUNTY, OKLAHOMA Transmitted herewith is the audit of Ottawa County, Oklahoma for the fiscal year ended June 30, 2018. The audit was conducted in accordance with 19 O.S. § 171. A report of this type can be critical in nature. Failure to report commendable features in the accounting and operating procedures of the entity should not be interpreted to mean that they do not exist. The goal of the State Auditor and Inspector is to promote accountability and fiscal integrity in state and local government. Maintaining our independence as we provide this service to the taxpayers of Oklahoma is of utmost importance. We wish to take this opportunity to express our appreciation for the assistance and cooperation extended to our office during our engagement. This report is a public document pursuant to the Oklahoma Open Records Act (51 O.S. § 24A.1 et seq.) and shall be open to any person for inspection and copying. Sincerely, CINDY BYRD, CPA OKLAHOMA STATE AUDITOR & INSPECTOR  OTTAWA COUNTY OFFICIALS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Board of County Commissioners District 1 – John Clarke District 2 – Chad Masterson District 3 – Russell Earls County Assessor Becky Smith County Clerk Robyn Mitchell County Sheriff Jeremy Floyd County Treasurer Kathy Bowling Court Clerk Cassie Key District Attorney Kenny Wright  OTTAWA COUNTY, OKLAHOMA FOR THE FISCAL YEAR ENDED JUNE 30, 2018 TABLE OF CONTENTS FINANCIAL SECTION Report of State Auditor and Inspector .......................................................................................................... 1 Financial Statement: Statement of Receipts, Disbursements, and Changes in Cash Balances—Regulatory Basis ................. 4 Notes to the Financial Statement ............................................................................................................ 5 SUPPLEMENTARY INFORMATION Comparative Schedule of Expenditures—Budget and Actual—Budgetary Basis—General Fund...... 12 Comparative Schedule of Expenditures—Budget and Actual—Budgetary Basis—Health Fund........ 13 Note to Supplementary Information ..................................................................................................... 14 INTERNAL CONTROL AND COMPLIANCE SECTION Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards ................................................................................................................. 15 Schedule of Findings and Responses .......................................................................................................... 17 i FINANCIAL SECTION  Independent Auditor’s Report TO THE OFFICERS OF OTTAWA COUNTY, OKLAHOMA Report on the Financial Statement We have audited the total—all county funds on the accompanying regulatory basis Statement of Receipts, Disbursements, and Changes in Cash Balances of Ottawa County, Oklahoma, as of and for the year ended June 30, 2018, and the related notes to the financial statement, which collectively comprise the County’s basic financial statement as listed in the table of contents. Management’s Responsibility for the Financial Statement Management is responsible for the preparation and fair presentation of this financial statement in accordance with the regulatory basis of accounting described in Note 1, and for determining that the regulatory basis of accounting is an acceptable basis for the preparation of the financial statement in the circumstances. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles As described in Note 1, the financial statement is prepared by Ottawa County using accounting practices prescribed or permitted by Oklahoma state law, which is a basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statement of the variances between the regulatory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. Adverse Opinion on U.S. Generally Accepted Accounting Principles In our opinion, because of the significance of the matter discussed in the “Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles” paragraph, the financial statement referred to above does not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of Ottawa County as of June 30, 2018, or changes in financial position for the year then ended. Unmodified Opinion on Regulatory Basis of Accounting In our opinion, the financial statement referred to above presents fairly, in all material respects, the total receipts, disbursements, and changes in cash balances for all county funds of Ottawa County, as of and for the year ended June 30, 2018, in accordance with the basis of accounting described in Note 1. Other Matters Supplementary Information Our audit was conducted for the purpose of forming an opinion on the total of all county funds on the financial statement. The supplementary information, as listed in the table of contents, is presented for purposes of additional analysis and is not a required part of the financial statement. The supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statement. Such information has been subjected to the auditing procedures applied in the audit of the financial statement and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statement or to the financial statement itself, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the financial statement. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 22, 2022, on our consideration of Ottawa County’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the County’s internal control over financial reporting or on compliance. That report is an 2 integral part of an audit performed in accordance with Government Auditing Standards in considering Ottawa County’s internal control over financial reporting and compliance. CINDY BYRD, CPA OKLAHOMA STATE AUDITOR & INSPECTOR November 22, 2022 3 REGULATORY BASIS FINANCIAL STATEMENT  OTTAWA COUNTY, OKLAHOMA STATEMENT OF RECEIPTS, DISBURSEMENTS, AND CHANGES IN CASH BALANCES—REGULATORY BASIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Beginning Ending Cash Balances Receipts Transfers Transfers Cash Balances July 1, 2017 Apportioned In Out Disbursements June 30, 2018 County Funds: County General Fund $ 1,329,037 $ 3,912,115 $ 262 $ - $ 4,237,414 $ 1,004,000 County Health 348,636 256,916 - - 331,906 273,646 Bureau Of Indian Affairs (BIA) Highway 117 321,340 - - 283,716 37,741 Highway 1,324,996 2,676,671 - - 2,228,287 1,773,380 Highway 1/2 Cent Sales Tax 1,298,251 1,237,176 - - 1,318,448 1,216,979 Courthouse Building Authority Sales Tax 599,472 609,655 - - 595,992 613,135 MIDA Rawlins Sinking 32 277 - 262 - 47 Firefighters Sales Tax 244,335 245,867 - - 229,705 260,497 Board of Prisoners 74,820 502,869 - - 522,122 55,567 County Bridge and Road Improvement Fund 504,844 313,088 - - 88,956 728,976 Resale 317,827 280,792 - - 195,336 403,283 Local Emergency Planning Committee 2,000 1,000 - - - 3,000 Emergency Management Performance Grant 25,956 20,000 - - 20,548 25,408 Sheriff Service Fee 103,601 296,480 - - 338,142 61,939 Sheriff Bond Fee 21,966 9,547 9,400 - 34,886 6,027 Sheriff Commissary 44,125 163,652 - 9,400 186,874 11,503 County Clerk Lien Fee 7,469 9,136 - - 5,370 11,235 County Clerk Preservation Fund 36,768 25,731 - - 14,047 48,452 County Treasurer Mortgage Certification Fee 2,770 4,530 - - 2,600 4,700 Littering Reward Fund 1,081 190 - - - 1,271 County Assessor Revolving 14,795 2,033 - - 3,291 13,537 Safe Room Project 278 - - - - 278 Drug Court Forfeiture Cash Fund 17,318 - - - 7,965 9,353 Total - All County Funds $ 6,320,494 $ 10,889,065 $ 9,662 $ 9,662 $ 10,645,605 $ 6,563,954 The notes to the financial statement are an integral part of this statement. 4  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2018 1. Summary of Significant Accounting Policies A. Reporting Entity Ottawa County is a subdivision of the State of Oklahoma created by the Oklahoma Constitution and regulated by Oklahoma Statutes. The accompanying financial statement presents the receipts, disbursements, and changes in cash balances of the total of all funds under the control of the primary government. The general fund is the county’s general operating fund, accounting for all financial resources except those required to be accounted for in another fund, where its use is restricted for a specified purpose. Other funds established by statute and under the control of the primary government are also presented. The County Treasurer collects, and remits material amounts of intergovernmental revenues and ad valorem tax revenue for other budgetary entities, including emergency medical districts, school districts, and cities and towns. The cash receipts and disbursements attributable to those other entities do not appear in funds on the County’s financial statement; those funds play no part in the County’s operations. Any trust or agency funds maintained by the County are not included in this presentation. B. Fund Accounting The County uses funds to report on receipts, disbursements, and changes in cash balances. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. Following are descriptions of the county funds included within the financial statement: County General Fund – accounts for the general operations of the government with revenues from ad valorem taxes, officer's fees, sales tax, interest earnings, and miscellaneous collections of the County. County Health – accounts for ad valorem taxes, miscellaneous fees charged by the County Health Department, and state and federal funds. Disbursements are for the operation of the County Health Department. Bureau of Indian Affairs (BIA) Highway – accounts for monies received from the federal government for construction and improvement of roads and bridges within the County as restricted by the grant agreements. Highway – accounts for revenues from state-imposed fuel taxes. Disbursements are for the maintenance and construction of county roads and bridges. 5  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Highway ½ Cent Sales Tax – accounts for the collection of sales tax revenue and the disbursement of funds are for the construction of county roads and bridges as restricted by the sales tax ballot. Courthouse Building Authority Sales Tax – accounts for the collection of sales tax revenue and the disbursement of funds are for the County Courthouse facilities and to pay the principal and interest on indebtedness on behalf of the County by the Ottawa County Governmental Building Authority as restricted by the sales tax ballot. MIDA Rawlins Sinking – accounts for revenues from ad valorem taxes collected for the payment of principal and interest on bonds and judgments against the County. The County paid off the outstanding debt in fiscal year 2017 and transferred fiscal year 2018 collections to the County General Fund in accordance with 62 O.S. § 445. Firefighters Sales Tax – accounts for the collection of sales tax revenue and disbursement of funds are for the purchase of equipment, general operation, maintenance, training, and the construction of new fire department buildings or improvements to existing fire department buildings as restricted by the sales tax ballot. Board of Prisoners – accounts for revenues from fees charged for boarding prisoners of non- county entities in the county jail. Disbursements are for feeding and housing inmates of the county jail as restricted by state statute. County Bridge and Road Improvement Fund – accounts for state money received for construction and/or improvement of bridges within the County. Resale – accounts for the receipt and disposition of interest and penalties on delinquent ad valorem taxes as restricted by state statute. Local Emergency Planning Committee – accounts for the receipt of funds from state and local governments and disbursed as restricted by the grant agreements. Emergency Management Performance Grant – accounts for the receipt of federal funds to be disbursed as restricted by the grant agreement. Sheriff Service Fee – accounts for the collection and disbursement of sheriff process service fees and Court Clerk fees as restricted by state statute. Sheriff Bond Fee – accounts for revenues from fees charged to all persons who post a surety bond and are subsequently incarcerated. Disbursements are for any legal expense of the jail. Sheriff Commissary – accounts for monies received from commissary sales in the county jail. Disbursements are for jail operations as defined by state statute. 6  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2018 County Clerk Lien Fee – accounts for revenues from fees charged by the County Clerk for filing liens. Disbursements are for any lawful expense of the County Clerk’s office. County Clerk Preservation Fund – accounts for revenues from fees collected for instruments filed in the County Clerk’s office as restricted by state statute for the preservation of records. County Treasurer Mortgage Certification Fee – accounts for the collection of fees by the Treasurer for mortgage tax certificates and the disbursement of the funds as restricted by state statute. Littering Reward Fund – accounts for the revenue received from the Court Clerk for littering fines. Disbursement of funds as restricted by Title 22 O.S. § 1334. County Assessor Revolving – accounts for the collection of fees for copies to be disbursed as restricted by state statute. Safe Room Project – accounts for federal grant revenues and disbursements for the Safe Room Reimbursement Project. Drug Court Forfeiture Cash Fund – accounts for revenues from distribution made by the District Attorney after settlement of forfeiture cases. Disbursements are for the maintenance and operations of the Sheriff’s Drug Task Force. C. Basis of Accounting The financial statement is prepared on a basis of accounting wherein amounts are recognized when received or disbursed. This basis of accounting differs from accounting principles generally accepted in the United States of America, which require revenues to be recognized when they become available and measurable or when they are earned, and expenditures or expenses to be recognized when the related liabilities are incurred. This regulatory basis financial presentation is not a comprehensive measure of economic condition or changes therein. Title 19 O.S. § 171 allows Oklahoma counties to present their financial statement in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) or on a regulatory basis. The County has elected to present their financial statement on a regulatory basis in conformity with Title 19 O.S. § 171, which specifies the format and presentation of such regulatory basis financial statements: county governments (primary only) are required to present their financial statements on a fund basis format with, at a minimum, the general fund and all other county funds, which represent ten percent or greater of total county revenue with all other funds included in the audit presented in the aggregate in a combining statement. However, the County has elected to present all funds included in the audit in the Statement of Receipts, Disbursements, and Changes in Cash Balances—Regulatory Basis. 7  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2018 D. Budget Under current Oklahoma Statutes, a general fund and a county health department fund are the only funds required to adopt a formal budget. On or before the first Monday in July of each year, each officer or department head submits an estimate of needs to the governing body. The budget is approved for the respective fund by office, or department and object. The County Board of Commissioners may approve changes of appropriations within the fund by office or department and object. To increase or decrease the budget by fund requires approval by the County Excise Board. E. Cash and Investments For the purposes of financial reporting, “Ending Cash Balances, June 30” includes cash and cash equivalents and investments as allowed by statutes. The County pools the cash of its various funds in maintaining its bank accounts. However, cash applicable to a particular fund is readily identifiable on the County’s books. The balance in the pooled cash accounts is available to meet current operating requirements. State statutes require financial institutions with which the County maintains funds to deposit collateral securities to secure the County’s deposits. The amount of collateral securities to be pledged is established by the County Treasurer; this amount must be at least the amount of the deposit to be secured, less the amount insured (by, for example, the FDIC). The County Treasurer has been authorized by the County’s governing board to make investments. Allowable investments are outlined in statutes 62 O.S. § 348.1 and § 348.3. All investments must be backed by the full faith and credit of the United States Government, the Oklahoma State Government, fully collateralized, or fully insured. All investments as classified by state statute are nonnegotiable certificates of deposit. Nonnegotiable certificates of deposit are not subject to interest rate risk or credit risk. 2. Ad Valorem Tax The County's property tax is levied each October 1 on the assessed value listed as of January 1 of the same year for all real and personal property located in the County, except certain exempt property. Assessed values are established by the County Assessor within the prescribed guidelines established by the Oklahoma Tax Commission and the State Equalization Board. Title 68 O.S. § 2820.A. states, ". . . Each assessor shall thereafter maintain an active and systematic program of visual inspection on a continuous basis and shall establish an inspection schedule which will result in the individual visual inspection of all taxable property within the county at least once each four (4) years." 8  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Taxes are due on November 1 following the levy date, although they may be paid in two equal installments. If the first half is paid prior to January 1, the second half is not delinquent until April 1. The County Treasurer, according to the law, shall give notice of delinquent taxes and special assessments by publication once a week for two consecutive weeks at any time after April 1, but prior to the end of September following the year the taxes were first due and payable. Unpaid real property taxes become a lien upon said property after the treasurer has perfected the lien by public notice. Unpaid delinquent personal property taxes are usually published in May. If the taxes are not paid within 30 days from publication, they shall be placed on the personal tax lien docket. 3. Other Information A. Pension Plan Plan Description. The County contributes to the Oklahoma Public Employees Retirement Plan (the Plan), a cost-sharing, multiple-employer defined benefit pension plan administered by the Oklahoma Public Employees Retirement System (OPERS). Benefit provisions are established and amended by the Oklahoma Legislature. The Plan provides retirement, disability, and death benefits to Plan members and beneficiaries. Title 74, Sections 901 through 943, as amended, establishes the provisions of the Plan. OPERS issues a publicly available financial report that includes financial statements and supplementary information. That report may be obtained by writing OPERS, P.O. Box 53007, Oklahoma City, Oklahoma 73105 or by calling 1-800-733-9008. Funding Policy. The contribution rates for each member category are established by the Oklahoma Legislature and are based on an actuarial calculation which is performed to determine the adequacy of contribution rates. B. Other Post Employment Benefits (OPEB) In addition to the pension benefits described in the Pension Plan note, OPERS provides post- retirement health care benefits of up to $105 each for retirees who are members of an eligible group plan. These benefits are funded on a pay-as-you-go basis as part of the overall retirement benefit. OPEB expenditure and participant information is available for the state as a whole; however, information specific to the County is not available nor can it be reasonably estimated. C. Contingent Liabilities Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, primarily the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable fund. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time; however, the County expects such amounts, if any, to be immaterial. 9  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2018 As of the end of the fiscal year, there were no claims or judgments that would have a material adverse effect on the financial condition of the County; however, the outcome of any lawsuit would not be determinable. D. Sales Tax On September 15, 1992, Ottawa County voters approved a permanent one-half cent county sales tax effective November 1, 1992. The purpose of the tax is for the construction, maintenance, and operation of a modern jail facility and operation of the Ottawa County Sheriff’s Department. These funds are accounted for in the County General Fund. On November 3, 1998, Ottawa County voters approved a permanent one-half cent county sales tax effective January 1, 1999, for the construction, operation, and maintenance of the county road and bridge system of Ottawa County, Oklahoma. These funds are accounted for in the Highway ½ Cent Sales Tax fund. On November 18, 2003, Ottawa County voters approved a one-tenth of one percent (1/10 of 1%) county sales tax in perpetuity and effective on or after April 1, 2004, which is to be used to fund the fire departments in Ottawa County, for purposes including, but not limited to equipment, general operations, maintenance, training and the construction of new fire department buildings or improvements to existing fire department buildings. These funds are accounted for in the Firefighter Sales Tax fund. On December 13, 2005, Ottawa County voters approved a one-fourth of one percent (1/4 of 1%) county sales tax for the sole purpose to pay for acquiring, constructing, equipping, repairing, renovating, operating, and maintaining County Courthouse facilities for the County of Ottawa County, Oklahoma, and to pay the principal and interest on indebtedness incurred on behalf of the County by the Ottawa County Governmental Building Authority for such purposes. The effective date of this tax is April 1, 2006 and shall expire and cease to be collected when sufficient funds have been collected from said levy to retire such indebtedness or on April 1, 2036, whichever shall occur earlier. These funds are accounted for in the Courthouse Building Authority Sales Tax fund. E. Interfund Transfers During the fiscal year, the County made the following transfers between cash funds: • $262 was transferred from the MIDA Rawlins Sinking fund to the County General Fund in accordance with 62 O.S. § 445. • $9,400 was transferred from the Sheriff Commissary fund to the Sheriff Bond Fee fund to meet the requirements of appropriation in accordance with 68 O.S. § 3021. 10  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2018 F. Special Items Investigative Audit The State Auditor and Inspector’s Office conducted a special investigative audit of the Ottawa County Sheriff’s Office for the period of July 1, 2016 through June 30, 2019. It was noted that the overall fiscal management of the Sheriff’s Department contributed to the need for supplemental appropriations over a 3-year period of almost $435,000. These findings will not have a material effect on the basic financial statement as of and for the year ending June 30, 2018. 11 SUPPLEMENTARY INFORMATION  OTTAWA COUNTY, OKLAHOMA COMPARATIVE SCHEDULE OF EXPENDITURES—BUDGET AND ACTUAL— BUDGETARY BASIS—GENERAL FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2018 General Fund Budget Actual Variance District Attorney - State $ 5,000 $ 4,063 $ 937 County Sheriff 2,167,369 2,155,895 11,474 County Treasurer 159,661 158,508 1,153 County Commissioners 205,254 191,760 13,494 County Commissioners O.S.U. Extension 91,773 90,172 1,601 County Clerk 332,921 331,148 1,773 Court Clerk 429,864 351,554 78,310 County Assessor 76,837 76,682 155 Revaluation of Real Property 227,518 227,518 - General Government 700,681 315,464 385,217 Excise - Equalization Board 1,938 1,884 54 County Election Expense 152,593 132,782 19,811 Emergency Management 77,866 73,024 4,842 County Audit Budget Account 36,802 12,135 24,667 County Cemetery Account 400 - 400 Free Fair Budget Account 9,500 9,493 7 Total Expenditures, Budgetary Basis $ 4,675,977 $ 4,132,082 $ 543,895 12  OTTAWA COUNTY, OKLAHOMA COMPARATIVE SCHEDULE OF EXPENDITURES—BUDGET AND ACTUAL— BUDGETARY BASIS—HEALTH FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Health Fund Budget Actual Variance Health and Welfare $ 520,526 $ 332,152 $ 188,374 Total Expenditures, Budgetary Basis $ 520,526 $ 332,152 $ 188,374 13  OTTAWA COUNTY, OKLAHOMA NOTE TO SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2018 1. Budgetary Schedules The Comparative Schedules of Expenditures—Budget and Actual—Budgetary Basis for the General Fund and the Health Fund present comparisons of the legally adopted budget with actual data. The "actual" data, as presented in the comparison of budget and actual, will differ from the data as presented in the Statement of Receipts, Disbursements, and Changes in Cash Balances because of adopting certain aspects of the budgetary basis of accounting and the adjusting of encumbrances and outstanding warrants to their related budget year. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in these funds. At the end of the year unencumbered appropriations lapse. 14 INTERNAL CONTROL AND COMPLIANCE SECTION  Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards TO THE OFFICERS OF OTTAWA COUNTY, OKLAHOMA We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the total—all county funds of the accompanying Statement of Receipts, Disbursements, and Changes in Cash Balances of Ottawa County, Oklahoma, as of and for the year ended June 30, 2018, and the related notes to the financial statement, which collectively comprise Ottawa County’s basic financial statement, prepared using accounting practices prescribed or permitted by Oklahoma state law, and have issued our report thereon dated November 22, 2022. Our report included an adverse opinion on the financial statement because the statement is prepared using accounting practices prescribed or permitted by Oklahoma state law, which is a basis of accounting other than accounting principles generally accepted in the United States of America. However, our report also included our opinion that the financial statement does present fairly, in all material respects, the receipts, disbursements, and changes in cash balances – regulatory basis of the County as of and for the year ended June 30, 2018, on the basis of accounting prescribed by Oklahoma state law, described in Note 1. Internal Control Over Financial Reporting In planning and performing our audit of the financial statement, we considered Ottawa County’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statement, but not for the purpose of expressing an opinion on the effectiveness of Ottawa County’s internal control. Accordingly, we do not express an opinion on the effectiveness of Ottawa County’s internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and responses, we identified certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying schedule of findings and responses to be material weaknesses: 2018-001, 2018-012, and 2018-013. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described in the accompanying schedule of findings and responses to be significant deficiencies: 2018-006. Compliance and Other Matters As part of obtaining reasonable assurance about whether Ottawa County’s financial statement is free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statement. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and responses as items 2018- 013. We noted certain matters regarding statutory compliance that we reported to the management of Ottawa County, which are included in Section 2 of the schedule of findings and responses contained in this report. Ottawa County’s Response to Findings Ottawa County’s response to the findings identified in our audit is described in the accompanying schedule of findings and responses. Ottawa County’s response was not subjected to the auditing procedures applied in the audit of the financial statement and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. CINDY BYRD, CPA OKLAHOMA STATE AUDITOR & INSPECTOR November 22, 2022 16  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 SECTION 1—Findings related to the Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Finding 2018-001 – Lack of County-Wide Controls and Disaster Recovery Plans (Repeat Finding – 2007-003, 2008-003, 2013-001, 2014-001, 2015-001, 2016-001, 2017-001) Condition: When assessing the county-wide internal controls, the following weaknesses were noted: • County-wide internal controls regarding Control Environment, Risk Assessment, Information and Communication, and Monitoring have not been designed. • The Commissioners, County Assessor, Court Clerk, and County Sheriff have not yet designed a Disaster Recovery Plan over information systems operating within each office. Cause of Condition: Policies and procedures have not been designed and implemented to address county- wide internal controls and to ensure all county offices have a Disaster Recovery Plan. Effect of Condition: Without an adequate system of county-wide controls, there is a greater risk of a breakdown in control activities which could result in unrecorded transactions, undetected errors, or misappropriation of funds. Further, the lack of a Disaster Recovery Plan could also result in the loss of data, the unreliability of data and increase the risk that the County may not recover from an emergency and/or disaster in a timely manner. Recommendation: The Oklahoma State Auditor & Inspector’s Office (OSAI) recommends that the County design and implement a system of county-wide procedures to identify and address risks related to financial reporting and to ensure that information is communicated effectively. OSAI also recommends that the County design monitoring procedures to assess the quality of performance over time. These procedures should be written policies and procedures and could be included in the County’s policies and procedures handbook. OSAI further recommends all officials have a formal Disaster Recovery Plan for their office in order to maintain operations in the event of a disaster. Management Response: District 1 County Commissioner: Although I was not in office during this fiscal year, I will work with the other elected officials to implement quarterly meetings to address county-wide internal controls over Control Environment, Risk Assessment, Information and Communication, and Monitoring. Additionally, the county is working to ensure that all county offices have created and implemented a Disaster Recovery Plan. District 2 County Commissioner: I was not in office during this fiscal year; however, I will work with the other elected officials to implement policy and procedures to address county-wide internal controls over Control Environment, Risk Assessment, Information and Communication, and Monitoring. Additionally, 17  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 the county is working to ensure that all county offices have created and implemented a Disaster Recovery Plan. District 3 County Commissioner: I will work with the other elected officials to implement quarterly meetings to address county-wide internal controls over Control Environment, Risk Assessment, Information and Communication, and Monitoring. Furthermore, the County is working to ensure that all county offices have created and implemented a Disaster Recovery Plan. County Assessor: My office now has a Disaster Recovery Plan. Court Clerk: I am in the process of developing a Disaster Recovery Plan for my office. County Sheriff: I was not in office during this time. This administration is attempting to put a Disaster Recovery Plan together. Criteria: The United States Government Accountability Office’s Standards for Internal Control in the Federal Government (2014 version) aided in guiding our assessments and conclusion. Although this publication (GAO Standards) addresses controls in the federal government, this criterion can be treated as best practices and may be applied as a framework for an internal control system for state, local, and quasi- governmental entities. The GAO Standards – Section 1 – Fundamental Concepts of Internal Control – OV1.01 states in part: Definition of Internal Control Internal control is a process effected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. Additionally, GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.04 states in part: Components, Principles, and Attributes Control Environment - The foundation for an internal control system. It provides the discipline and structure to help an entity achieve its objectives. Risk Assessment - Assesses the risks facing the entity as it seeks to achieve its objectives. This assessment provides the basis for developing appropriate risk responses. Information and Communication – The quality information management and personnel communicate and use to support the internal control system. Monitoring - Activities management establishes and operates to assess the quality of performance over time and promptly resolve the findings of audits and other reviews. 18  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Further, an important aspect of internal controls is the safeguarding of assets which includes adequate Disaster Recovery Plans. Internal controls over safeguarding of assets constitute a process, affected by an entity’s governing body, management, and other personnel, designed to provide reasonable assurance regarding prevention in a county being unable to function in the event of a disaster. According to the standards of the Information Systems Audit and Control Association (Cobit Delivery and Support 4), information services function management should ensure that a written Disaster Recovery Plan is documented and contains guidelines and instructions for the County to follow in the event of a disaster. Finding 2018-006 – Lack of Internal Controls Over the Financial Statement and Notes to the Financial Statement (Repeat Finding – 2016-006, 2017-006) Condition: The County is responsible for preparing their annual financial statement, notes to the financial statement, and supplemental information. However, there is no indication the fiscal year 2018 financial statement, notes to the financial statement, and supplemental information are prepared timely, reviewed, and approved by County officials prior to being submitted to OSAI. Cause of Condition Policies and procedures have not been designed and implemented to ensure the County’s financial statement, notes to the financial statement, and supplemental information are prepared in a timely manner and accurately presented. Effect of Condition: This condition could result in the County’s financial statement, notes to the financial statement, and supplemental information being materially misstated. Recommendation: OSAI recommends the County design and implement policies and procedures to ensure the financial statement, notes to the financial statement, and supplemental information are prepared in a timely manner, reviewed for accuracy and completeness, and approved by management. Management Response: Chairman of the Board of County Commissioners: I will work with other elected officials to design and implement policies and procedures to ensure financial statement, notes to the financial statement, and supplemental information are error free and are presented in a timely manner. County Clerk: We will work to implement policies and procedures to ensure the financial statement, notes to the financial statement, and supplemental information are free from error and are timely presented. County Treasurer: The County Treasurer is now reviewing the financial statement, notes to the financial statement, and supplemental information, which is being prepared by another company, to ensure the report is free from error and are timely presented. Criteria: The limitations of the auditor are described in the American Institute of Certified Public Accountants Clarified Statements on Auditing Standards AU-C § 210, which states, in part: “The concept of an independent audit requires that the auditor's role does not involve assuming management's 19  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 responsibility for the preparation and fair presentation of the financial statements or assuming responsibility for the entity's related internal control and that the auditor has a reasonable expectation of obtaining the information necessary for the audit insofar as management is able to provide or procure it. Accordingly, the premise is fundamental to the conduct of an independent audit.” The County’s management is responsible for establishing internal control procedures to prevent or detect misstatements in a timely manner. This includes preparation of the financial statements and accompanying notes to the financial statements in accordance with applicable accounting principles. Statement on Auditing Standards (SAS) No. 115 indicates that the County must have adequate knowledge and expertise to apply accounting principles to the financial statements or to review financial statements prepared on their behalf by others to ensure they are prepared in accordance with these principles. Professional audit standards preclude the external financial statement auditor from performing any part of management’s control activities or be a component of the internal controls over financial reporting as this would impair their independence. The County is required to present a financial statement for each fiscal year ended June 30. Title 19 O.S. § 171 states in part, "Unless the county elects to prepare its financial statement in accordance with Generally Accepted Accounting Principles as prescribed by the Governmental Accounting Standards Board, the county shall present their financial statements in a regulatory basis of accounting." The GAO Standards – Principle 13 – Use Quality Information states: Data Processed into Quality Information 13.05 - Management processes the obtained data into quality information that supports the internal control system. This involves processing data into information and then evaluating the processed information so that it is quality information. Quality information meets the identified information requirements when relevant data from reliable sources are used. Quality information is appropriate, current, complete, accurate, accessible, and provided on a timely basis. Management considers these characteristics as well as the information processing objectives in evaluating processed information and makes revisions, when necessary, so that the information is quality information. 13.06 - Management processes relevant data from reliable sources into quality information within the entity’s information system. An information system is the people, processes, data, and technology that management organizes to obtain, communicate, or dispose of information. Management uses the quality information to make informed decisions and evaluate the entity’s performance in achieving key objectives and addressing risks. 20  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Finding 2018-012 – Lack of Internal Controls Over the Reconciliation of the Appropriation Ledger to the General Ledger (Repeat Finding – 2007-002, 2008-002, 2013-004, 2014-004, 2016-009, 2017- 009) Condition: The County Clerk did not reconcile the appropriation ledger to the County Treasurer’s general ledger. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the reconciliation of the County Clerk’s appropriation ledger to the County Treasurer’s general ledger is performed on a monthly basis for all funds. Effect of Condition: This condition could result in unrecorded transactions, misstated financial reports, undetected errors, and misappropriation of funds. Recommendation: OSAI recommends the County Clerk reconciles the appropriation ledger to the County Treasurer’s general ledger on a monthly basis. The reconciliation should be reviewed and approved by someone other than the preparer. All documentation to support the performance and review and approval of the reconciliation should be retained. Management Response: County Clerk: We now reconcile the appropriation ledger to the general ledger on a monthly basis. Criteria: The GAO Standards - Principle 16 – Perform Monitoring Activities: 16.05 states in part: Internal Control System Monitoring Management performs ongoing monitoring of the design and operating effectiveness of the internal control system as part of the normal course of operations. Ongoing monitoring includes regular management and supervisory activities, comparisons, reconciliations, and other routine actions. Finding 2018-013 – Lack of Internal Controls and Noncompliance Over Disbursement Process Condition: Upon inquiry of County personnel and observation of the County’s disbursement process, we noted the following: A sample of sixty-three (63) out of six thousand two-hundred fifty-nine (6,259) disbursements reflected the following: • One (1) disbursement totaling $12,038 was not approved by a majority of the BOCC. • One (1) disbursement totaling $8,590 was not made for the proper amount. • Three (3) disbursements totaling $5,795 were not supported by adequate documentation – timesheets were not available. • Four (4) disbursements totaling $111,067 were not charged to the proper period. 21  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 • Nine (9) disbursements totaling $124,579 were not encumbered prior to receiving goods or services. Cause of Condition: Policies and procedures have not been fully implemented with regard to the disbursement process to ensure compliance with state statutes. Effect of Condition: These conditions resulted in noncompliance with state statutes and could result in unrecorded transactions, misstated financial reports, undetected errors, misappropriation of funds, and a financial burden on the County. Recommendation: OSAI recommends that the County adhere to state purchasing guidelines to ensure encumbrances are made before goods and services are ordered and to ensure availability of funds. Additionally, OSAI recommends purchase orders are approved by a majority of the BOCC, made for the proper amount, and are supported by adequate documentation. Furthermore, OSAI recommends goods or services be paid from funds designated for use during the fiscal year in which the goods or services are obtained. Management Response: District 1 County Commissioners: I was not in office at this time; however, I will work with other elected officials to ensure expenditures are approved by a majority of the BOCC, are made for the proper amount, are supported by adequate documentation, and are paid for in the proper period. I will also work with other elected officials to ensure a purchase order is encumbered prior to the ordering of goods or services. District 2 County Commissioner: I was not in office at the time; however, I will work with the other elected officials to ensure that we are in compliance with all state statutes that govern the disbursement process. District 3 County Commissioner/Chairman of the Board of County Commissioners: I will work with other elected officials to ensure funds are encumbered before goods and services are ordered. Also, the Board of County Commissioners will ensue purchase orders are approved by a majority of the BOCC, there is adequate documentation to support the amount of the purchase order, and expenditures are paid for from funds designated for use during the fiscal year in which the goods or services are obtained. County Clerk: We will adhere to state purchasing guidelines to ensure encumbrances are made before goods and services are ordered. We will use funds designated for use during the fiscal year in which goods and services are obtained. We will also make sure purchase orders are approved by a majority of the BOCC, made for the proper amount, and are supported by adequate documentation County Sheriff: I was not in office at this time; however, this administration will work to ensure that expenditures are made for the proper amounts, supported by adequate documentation, and goods or services are not obtained prior to encumbering a purchase order. 22  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Criteria: GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.23 states in part: Objectives of an Entity – Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. Effective internal controls require that management properly implement procedures to ensure that expenditures comply with 19 O.S. § 1505. Title 19 O.S. § 326 states in part, “the County Commissioners shall meet and hold sessions for the transaction of business in the county courthouse, at the county seat, on or before the first Monday of each month, and may remain in session as long as the public business may require, and the passing upon, allowing or rejecting of bills against the county shall be taken up and passed upon by the board in the order in which the claims have been filed, and in which order such claims must be entered upon the calendar, except salary, wage and compensation claims of officers and deputies and employees, which salary, wage and compensation claims may be considered and paid, on or after the termination of the service pay period; provided, that such claims by subordinate deputies and employees be first approved by the officer having charge of the office or department.” Title 62 O.S. § 310.4 states in part, “All unencumbered balances, if any, … on hand at the close of day June 30, may remain as a credit for said fiscal year up to the close of day September 30, next ... Provided this act shall not be so construed to allow the incurring of a new indebtedness after June 30 chargeable to the appropriation account of the immediately preceding fiscal year.” Title 68 O.S. § 3003 states in part, … “The recipient government may encumber funds in an amount not to exceed the sum of the total letter of commitment, which is a binding commitment of funding which the recipient government will receive for the project or projects eligible for such federal funding. The encumbrance of funds authorized by this section shall be made in accordance with procedures prescribed by the State Auditor and Inspector and shall be administered in accordance with rules and regulations concerning such distribution adopted by the federal government and the state agency, board, or commission. Any expenditure incurred by the recipient government using the letter of commitment appropriation process and disallowed by the federal government or state agency, board, or commission administering the funds shall be paid by the recipient government.” 23  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 SECTION 2—This section contains certain matters not required to be reported in accordance with Government Auditing Standards. However, we believe these matters are significant enough to bring to management’s attention. We recommend that management consider these matters and take appropriate corrective action. Finding 2018-016 – Lack of Internal Controls and Noncompliance Over Cash Bonds Condition: Upon inquiry, observation of procedures and records, and testwork performed, OSAI noted the Sheriff’s office did not remit all cash bonds to the Court Clerk’s office. Of the twelve (12) cash bonds tested: • One (1) cash bond totaling $100 could not be located. • Only $9 of a $199 cash bond could be traced to the Sheriff's Cash Bond Official Depository Account. The remaining $190 could not be reconciled to the Sheriff's Cash Bond Official Depository Ledger. Additionally, when comparing the dates noted on the Sheriff's Cash Bond receipt book to the deposit date on the Sheriff's Cash Bond Official Depository Ledger, we determined the Sheriff is not making daily deposits. Cause of Condition: Policies and procedures have not been designed and implemented to ensure cash bonds are properly accounted for and safeguarded. Effect of Condition: These conditions resulted in noncompliance with state statute, inaccurate and incomplete records, and could result in a misappropriation of funds. Recommendation: OSAI recommends the County Sheriff design and implement policies and procedures to ensure all cash bonds are receipted, deposited, and remitted to the Court Clerk’s office in a timely manner. OSAI also recommends that all monies received under the color of the office be deposited on a daily basis are required by Title 19 O.S. § 682. Management Response: County Sheriff: I was not in office during this time. Currently, any cash bonds or money orders for bonds are being taken to the County Treasurer’s office on a daily basis, if there are funds to take over. If cash or money orders come in over the weekend, they are taken to the Treasurer’s office on Monday. Our office will then write a check out to the Court Clerk’s office for district charges or to any municipality the bonds need to go to. Criteria: The GAO Standards – Principle 10 – Design Control Activities – 10.03 states in part: Accurate and timely recording of transactions Transactions are promptly recorded to maintain their relevance and value to management in controlling operations and making decisions. This applies to the entire process or life 24  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 cycle of a transaction or event from its initiation and authorization through its final classification in summary records. In addition, management designs control activities so that all transactions are completely and accurately recorded. Additionally, GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.23 states in part: Objectives of an Entity – Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. Title 19 O.S. § 682 states in part, “…It shall be the duty of each and every county officer, county board, county commission and all members and employees of either thereof, to deposit daily in the official depository designated in Section 681 of this title, all monies, checks, drafts, orders, vouchers, funds, rentals, penalties, costs, proceeds of sale of property, fees, fines, forfeitures and public charges of every kind received or collected by virtue or under color of office…” Finding 2018-018 – Lack of Internal Controls and Noncompliance Over Inmate Trust Fund Checking Account and Sheriff Commissary Fund (Repeat Finding) Condition: Upon inquiry and observation of the Inmate Trust Fund Checking Account and Sheriff Commissary fund, the following exceptions were noted: Inmate Trust Fund Checking Account: • One employee is responsible for accessing and balancing lockbox and Kiosk collections, reconciling collections from the front window or mail to receipts issued, accessing the safe the daily collections are maintained in, preparing and reconciling weekly deposit ticket, updating inmates’ account balances with credits and deductions, and issuing checks from the Inmate Trust Fund Checking Account. • Bank reconciliations were not performed on the Inmate Trust Fund Checking Account in fiscal year 2018. • There is no oversight over the Inmate Trust Fund Checking Account bookkeeping process to ensure completeness and accuracy. • Collections are not deposited in the bank on a daily basis. • The County Sheriff cannot determine who has the combination to the safe; therefore, there are no controls in place to ensure access to the safe, where collections are held, is restricted. • Policies and procedures have not been designed to track unclaimed funds. • Expenditures are made from the Inmate Trust Fund Checking Account for purposes other than what is statutorily allowed. 25  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Sheriff Commissary Fund: • All collections from the inmates for commissary purchases made by the inmate during his or her incarceration are not deposited into the Sheriff Commissary fund as required by state statute. • Inmate telephone commissions were being deposited into the Sheriff Commissary fund instead of the Sheriff Service Fee fund. • The County Sheriff’s office does not file an annual report for the Sheriff Commissary with the Board of County Commissioners by January 15th of each year. Cause of Condition: Policies and procedures have not been designed and implemented for proper administration regarding the Inmate Trust Fund Checking Account and the Sheriff Commissary Fund. Effect of Condition: These conditions resulted in noncompliance with state statutes. Also, without proper accounting and safeguarding of the Inmate Trust Fund Checking Account, there is an increased risk of misappropriation of funds. Recommendation: OSAI recommends that management be aware of these conditions and determine if duties can be properly segregated. In the event that segregation of duties is not possible due to limited personnel, OSAI recommends implementing compensating controls to mitigate the risks involved with a concentration of duties. Compensating controls would include separating key processes and/or critical functions of the office and having management review and approval of accounting functions. OSAI further recommends the County Sheriff implement procedures to ensure: • Bank reconciliations are performed on a monthly basis and denote proof of review and approval by someone other than the preparer. • The individual inmates’ trust fund balances are reconciled to the bank statements each month. • Daily collections are deposited into the Inmate Trust Fund Checking Account on a daily basis. • All collections are maintained in a secure location with limited access. • Unclaimed funds are tracked. • Expenditures are made from the Inmate Trust Fund Checking Account in accordance with 19 O.S. § 531 (A). • Collections from the inmates for commissary purchases and telephone usage are deposited in accordance with 19 O.S. § 180.43 (E) and 19 O.S. § 531 (A). • The County Sheriff files a report of the commissary with the County Commissioners by January 15th of each year in accordance with 19 O.S. § 180.43 (D). Management Response: County Sheriff: I was not in office during this fiscal year. We have implemented the following to correct issued noted: • We use a different Inmate Trust Commissary vendor for the inmate trust fund and commissary accounts than the prior administration. One employee takes the money out of both lockboxes and works with another employee to match the funds with the receipts from the lockboxes and reconcile with the vendor reports. 26  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 • We no longer accept money from the front window or through the mail. • When inmates are released, they are issued a debit card and not a check. The only time a check is written is when an inmate is transferred to a prison due to the prison not accepting debit cards. • Deposits are now made on a daily basis unless it is after banking hours, in those cases the funds are locked in a safe, located in the office manager’s office, which is also locked after hours, and taken to the bank the next business day. • The safe combination is known by office employees only. • Bank reconciliations are now being done every month and are signed by the preparer and then reviewed, approved, and signed by someone other than the preparer. • Unclaimed funds are maintained in the Inmate Trust Fund Checking Account and can be tracked in the Inmate Trust Commissary vendor’s system • All funds received from commissary purchases are now deposited into the Sheriff Commissary fund. Additionally, until informed by OSAI, I was unaware that state statute required inmate telephone commissions to be deposited into the Sheriff Service Fee fund. Since becoming aware of this requirement, we will ensure these funds are deposited into the Sheriff Service Fee fund according to statute. Furthermore, this administration is going to attempt to file a report of the commissary with the County Commissioners on a yearly basis. Criteria: The GAO Standards – Principle 10 – Design Control Activities – 10.03 states in part: Physical control over vulnerable assets Management establishes physical control to secure and safeguard vulnerable assets. Examples include security for and limited access to assets such as cash, securities, inventories, and equipment that might be vulnerable to risk of loss or unauthorized use. Management periodically counts and compares such assets to control records. Establishment and review of performance measures and indicators Management establishes activities to monitor performance measures and indicators. These may include comparisons and assessments relating different sets of data to one another so that analyses of the relationships can be made, and appropriate actions taken. Management designs controls aimed at validating the propriety and integrity of both entity and individual performance measures and indicators. Segregation of duties Management divides or segregates key duties and responsibilities among different people to reduce the risk of error, misuse, or fraud. This includes separating the responsibilities for authorizing transactions, processing and recording them, reviewing the transactions, and handling any related assets so that no one individual controls all key aspects of a transaction or event. 27  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Accurate and timely recording of transactions Transactions are promptly recorded to maintain their relevance and value to management in controlling operations and making decisions. This applies to the entire process or life cycle of a transaction or event from its initiation and authorization through its final classification in summary records. In addition, management designs control activities so that all transactions are completely and accurately recorded. Access restrictions to and accountability for resources and records Management limits access to resources and records to authorized individuals and assigns and maintains accountability for their custody and use. Management may periodically compare resources with the recorded accountability to help reduce the risk of errors, fraud, misuse, or unauthorized alteration. Additionally, GAO Standards – Principle 16 – Perform Monitoring Activities – 16.05 states in part: Internal Control System Monitoring Management performs ongoing monitoring of the design and operating effectiveness of the internal control system as part of the normal course of operations. Ongoing monitoring includes regular management and supervisory activities, comparisons, reconciliations, and other routine actions. Furthermore, GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.23 states in part: Objectives of an Entity – Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. Title 19 O.S. § 180.43(D) requires that an annual report of the Sheriff’s Commissary be submitted to the Board of County Commissioners by January 15 of each year. Title 19 O.S. § 180.43(E) states in part, “Each county sheriff may operate, or contract the operation of, a telephone system…Any funds received pursuant to said operations shall be the funds of the county where the persons are incarcerated and shall be deposited in the Sheriff’s Service Fee Account.” Title 19 O.S. § 531 (A). states in part, “…The county sheriff may establish a checking account, to be designated the “Inmate Trust Fund Checking Account”… The county sheriff shall deposit all monies collected from inmates incarcerated in the county jail into this checking account and may write checks to the Sheriff’s Commissary Account for purchases made by the inmate during his or her incarceration and to the inmate from unencumbered balances due the inmate upon his or her discharge.” 28  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Title 22 O.S. § 1325(F, H) provides guidance for the handling of unclaimed property or money in the County Sheriff’s possession. 29