COUNTY AUDIT Ottawa County For the fiscal year ended June 30, 2009 Oklahoma State Auditor & Inspector Gary A. Jones, CPA, CFE  OTTAWA COUNTY, OKLAHOMA FINANCIAL STATEMENT AND INDEPENDENT AUDITOR'S REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2009 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 Collection, pursuant to 74 O.S. § 3105.B. May 1, 2014 TO THE CITIZENS OF OTTAWA COUNTY, OKLAHOMA Transmitted herewith is the audit of Ottawa County, Oklahoma for the fiscal year ended June 30, 2009. 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. Sincerely, GARY A. JONES, CPA, CFE OKLAHOMA STATE AUDITOR & INSPECTOR  OTTAWA COUNTY, OKLAHOMA FOR THE FISCAL YEAR ENDED JUNE 30, 2009 TABLE OF CONTENTS INTRODUCTORY SECTION (Unaudited) Statistical Information .................................................................................................................................. iii County Officials ........................................................................................................................................... iv Ad Valorem Tax Distribution ....................................................................................................................... v Assessed Value of Property Trend Analysis ................................................................................................ vi County Payroll Expenditures Analysis ...................................................................................................... vii County General Fund Analysis ................................................................................................................. viii County Highway Fund Analysis ................................................................................................................. ix FINANCIAL SECTION Report of State Auditor and Inspector .......................................................................................................... 1 Financial Statement: Statement of Receipts, Disbursements, and Changes in Cash Balances—Regulatory Basis (with Combining Information)—Major Funds ....................................................................................... 3 Notes to the Financial Statement ............................................................................................................ 4 OTHER SUPPLEMENTARY INFORMATION Comparative Schedule of Receipts, Expenditures, and Changes in Cash Balances—Budget and Actual—Budgetary Basis—General Fund ............................................. 10 Comparative Schedule of Receipts, Expenditures, and Changes in Cash Balances—Budget and Actual—Budgetary Basis—County Health Department Fund .............. 12 Combining Statement of Receipts, Disbursements, and Changes in Cash Balances—Regulatory Basis—Remaining Aggregate Funds ..................................................... 13 Notes to Other Supplementary Information ......................................................................................... 14 i  OTTAWA COUNTY, OKLAHOMA FOR THE FISCAL YEAR ENDED JUNE 30, 2009 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 ................................................................................................................. 16 Schedule of Findings and Responses .......................................................................................................... 18 ii  INTRODUCTORY SECTION UNAUDITED INFORMATION ON PAGES iii -ix PRESENTED FOR INFORMATIONAL PURPOSES ONLY  OTTAWA COUNTY, OKLAHOMA STATISTICAL INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2009 The extreme northeastern county of Oklahoma, bordering Kansas and Missouri, is named for the Ottawa Indians. But Ottawa comes from the Algonquian term adawe, meaning to “buy and sell.” This county has been the home to members of a greater number of Indian tribes than any other country in the United States. With 71 percent of the total land area in farms, as much as 60 percent of the county’s agricultural income is from livestock and dairy products, and the rest from such crops as wheat, corn, grain, sorghums, soybeans, and grass. The early existence of a vast lead and zinc field is evident from huge mountains of chat still present in the northern part of the country. Northeastern Oklahoma A&M College is located at Miami, the county seat. Industries in the county include clothing, furniture, boat, metal and leather manufacturing, mushroom cultivation, and concrete and block production. Two books, Pictorial Reflections of Ottawa County and History of Ottawa County, have been written about the county. For additional information, contact the Ottawa County Historical Society or call the County Clerk’s office at 918/542-3332. County Seat – Miami Area – 484.73 Square Miles County Population – 32,474 (2007 est.) Farms – 1,160 Land in Farms – 237,986 Acres Primary Source: Oklahoma Almanac 2009-2010 iii  OTTAWA COUNTY OFFICIALS FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Board of County Commissioners District 1 – John Clarke District 2 – Gary Wyrick District 3 – Russell Earls County Assessor Linda Kelly County Clerk Reba Sill County Sheriff Terry Durborow County Treasurer Brenda Connor Court Clerk Cathy Williams District Attorney Eddie Wyant iv  OTTAWA COUNTY, OKLAHOMA AD VALOREM TAX DISTRIBUTION SHARE OF THE AVERAGE MILLAGE FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Property taxes are calculated by applying a millage rate to the assessed valuation of property. Millage rates are established by the Oklahoma Constitution. One mill equals one-thousandth of a dollar. For example, if the assessed value of a property is $1,000.00 and the millage rate is 1.00, then the tax on that property is $1.00. This chart shows the different entities of the County and their share of the various millages as authorized by the Constitution. School Dist. Avg. 83.97% County Health 2.06% County General Sinking 13.71% 0.26% County-Wide Millages School District Millages Career County General 10.24 Gen. Bldg. Skg. Tech Common Total County Health 1.54 Turkey Ford D-10 36.89 5.27 4.39 11.26 4.10 61.91 County Sinking 0.19 Wyandotte I-1 36.46 5.21 10.15 11.26 4.10 67.18 Quapaw I-14 35.78 5.11 - 11.26 4.10 56.25 Other Picher I-15 35.81 5.12 - 11.26 4.10 56.29 Miami (City) 4.92 Commerce I-18 35.56 5.08 - 11.26 4.10 56.00 Miami School District 23 EMS 3.07 Miami I-23 35.70 5.10 12.73 11.26 4.10 68.89 Afton I-26 36.08 5.15 - 11.26 4.10 56.59 Fairland I-31 36.04 5.15 9.01 11.26 4.10 65.56 Neosho Valley I-17 35.46 5.07 16.87 11.26 4.10 72.76 v  OTTAWA COUNTY, OKLAHOMA ASSESSED VALUE OF PROPERTY TREND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Estimated Valuation Public Real Homestead Fair Market Date Personal Service Estate Exemption Net Value Value 1/1/2008 $23,282,161 $14,684,431 $87,923,743 $7,657,202 $118,233,133 $1,037,132,746 1/1/2007 $25,218,702 $15,864,921 $84,203,794 $7,690,795 $117,596,622 $1,031,549,316 1/1/2006 $22,408,958 $16,325,802 $80,477,394 $7,194,769 $112,017,385 $982,608,640 1/1/2005 $21,062,305 $15,447,928 $77,509,545 $7,444,815 $106,574,963 $934,868,096 1/1/2004 $19,464,283 $13,681,805 $73,828,912 $7,481,700 $99,493,300 $829,110,833 Estimated Fair Market Value $1,200,000,000 $1,031,549,316 $1,037,132,746 $982,608,640 $1,000,000,000 $934,868,096 $829,110,833 $800,000,000 $600,000,000 $400,000,000 $200,000,000 $0 1/1/2004 1/1/2005 1/1/2006 1/1/2007 1/1/2008 vi  OTTAWA COUNTY, OKLAHOMA COUNTY PAYROLL EXPENDITURES ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2009 County officers’ salaries are based upon the assessed valuation and population of the counties. State statutes provide guidelines for establishing elected officers’ salaries. The Board of County Commissioners sets the salaries for all elected county officials within the limits set by the statutes. The designated deputy or assistant’s salary cannot exceed the principal officer’s salary. Salaries for other deputies or assistants cannot exceed the principal officer’s salary. The information presented below is for the fiscal year ended June 30, 2009. Payroll Expenditures by Department $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- County County District 1 District 2 District 3 County Clerk Sheriff Treasurer Payroll Dollars $464,446 $539,758 $498,238 $1,400,016 $162,272 $275,441 Payroll Expenditures by Department $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $- Election Board General Government Court Clerk County Assessor Payroll Dollars $114,971 $137,641 $514,376 $205,089 vii  OTTAWA COUNTY, OKLAHOMA COUNTY GENERAL FUND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2009 County General Fund The Oklahoma Constitution and the Oklahoma Statutes authorize counties to create a County General Fund, which is the county’s primary source of operating revenue. The County General Fund is typically used for county employees’ salaries plus many expenses for county maintenance and operation. It also provides revenue for various budget accounts and accounts that support special services and programs. The Board of County Commissioners must review and approve all expenditures made from the County General Fund. The primary revenue source for the County General Fund is usually the county’s ad valorem tax collected on real, personal (if applicable), and public service property. Smaller amounts of revenue can come from other sources such as fees, sales tax, use tax, state transfer payments, in-lieu taxes, and reimbursements. The chart below summarizes receipts and disbursements of the County’s General Fund for the last five fiscal years. $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- FYE 2005 FYE 2006 FYE 2007 FYE 2008 FYE 2009 Receipts Apportioned $2,785,727 $2,851,114 $2,966,592 $3,305,213 $3,726,006 Disbursements $2,796,507 $2,955,898 $2,794,608 $2,916,423 $4,552,392 viii  OTTAWA COUNTY, OKLAHOMA COUNTY HIGHWAY FUND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2009 County Highway Fund The County receives major funding for roads and highways from a state imposed fuel tax. Taxes are collected by the Oklahoma Tax Commission. Taxes are imposed on all gasoline, diesel, and special fuel sales statewide. The County’s share is determined on formulas based on the County population, road miles, and land area and is remitted to the County monthly. These funds are earmarked for roads and highways only and are accounted for in the County Highway Fund. The chart below summarizes receipts and disbursements of the County’s Highway Fund for the last five fiscal years. $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- FYE 2005 FYE 2006 FYE 2007 FYE 2008 FYE 2009 Receipts Apportioned $1,858,265 $2,189,659 $2,244,132 $2,673,764 $2,871,912 Disbursements $1,985,591 $2,171,556 $1,981,087 $2,531,382 $2,650,765 ix FINANCIAL SECTION  Independent Auditor’s Report TO THE OFFICERS OF OTTAWA COUNTY, OKLAHOMA We have audited the combined 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, 2009, listed in the table of contents as the financial statement. This financial statement is the responsibility of Ottawa County’s management. Our responsibility is to express an opinion on the combined total—all county funds 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As described in Note 1, this financial statement was prepared using accounting practices prescribed or permitted by Oklahoma state law, which practices differ from accounting principles generally accepted in the United States of America. The differences between this regulatory basis of accounting and accounting principles generally accepted in the United States of America are also described in Note 1. In our opinion, because of the effects of the matter discussed in the preceding paragraph, the financial statement referred to above does not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of Ottawa County as of June 30, 2009, or changes in its financial position for the year then ended. In our opinion, the financial statement referred to above presents fairly, in all material respects, the combined total of receipts, disbursements, and changes in cash balances for all county funds of Ottawa County, for the year ended June 30, 2009, on the basis of accounting described in Note 1. In accordance with Government Auditing Standards, we have also issued our report dated April 28, 2014, 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 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Our audit was conducted for the purpose of forming an opinion on the combined total of all county funds on the financial statement. The Other 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. Such supplementary information has been subjected to the auditing procedures applied in the audit of the combined total—all county funds on the regulatory basis Statement of Receipts, Disbursements and Changes in Cash Balances and, in our opinion, is fairly stated, in all material respects, in relation to the combined total—all county funds. The information listed in the table of contents under Introductory Section has not been audited by us, and accordingly, we express no opinion on it. GARY A. JONES, CPA, CFE OKLAHOMA STATE AUDITOR & INSPECTOR April 28, 2014 2 REGULATORY BASIS FINANCIAL STATEMENT  OTTAWA COUNTY, OKLAHOMA STATEMENT OF RECEIPTS, DISBURSEMENTS, AND CHANGES IN CASH BALANCES—REGULATORY BASIS (WITH COMBINING INFORMATION)—MAJOR FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Beginning Ending Cash Balances Receipts Cash Balances July 1, 2008 Apportioned Disbursements June 30, 2009 Combining Information: Major Funds: County General Fund $ 1,151,234 $ 3,726,006 $ 4,552,392 $ 324,848 County Sales Tax 49,520 1,202 48,840 1,882 County Health 155,173 224,057 256,546 122,684 BIA/Highway - 4,693,484 126,708 4,566,776 Highway 1,261,961 2,871,912 2,650,765 1,483,108 Highway 1/2 Cent Sales Tax 1,004,802 1,564,334 1,004,593 1,564,543 Courthouse Building Authority Sales Tax 326,961 696,281 621,794 401,448 MIDA Rawlins Sinking 38,340 23,772 23,261 38,851 Firefighters Sales Tax 179,269 240,586 176,211 243,644 Remaining Aggregate Funds 447,572 1,327,323 1,509,826 265,069 Combined Total - All County Funds, As Restated $ 4,614,832 $ 15,368,957 $ 10,970,936 $ 9,012,853 The notes to the financial statement are an integral part of this statement. 3  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2009 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 as combining information within the financial statement: County General Fund – accounts for the general operations of the government. County Sales Tax – revenues are from interest earnings. This is the residual balance of sales tax collected for the construction of the County jail. Disbursements are for capital improvements to the jail. County Health – revenues are from ad valorem taxes, miscellaneous fees charged by the health department, and state and federal funds. Disbursements are from the operation of the county health department. BIA/Highway – revenues are from the Bureau of Indian Affairs (BIA). Disbursements are for multiple county road projects in District 2. Highway – revenues are from state imposed fuel taxes. Disbursements are for the maintenance and construction of county roads and bridges. 4  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Highway ½ Cent Sales Tax – revenues are from a county sales tax. Disbursements are for the construction of county roads and bridges. Courthouse Building Authority Sales Tax – revenues are from a county sales tax. Disbursements 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. MIDA Rawlins Sinking – revenues are from ad valorem taxes and interest earnings. Disbursements are for the payment of principal and interest on bonds and judgments against the County. Firefighters Sales Tax – revenues are from county sales tax. Disbursements are for general operation, maintenance, training, and construction of new fire department buildings or improvements to existing fire department buildings. 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 specifies the format and presentation for Oklahoma counties to present their financial statement on a regulatory basis. 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. All other funds included in the audit shall be presented in the aggregate in a combining statement. 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. For the highway funds and other funds, which are not required to adopt a formal budget, appropriations are made on a monthly basis, according to the funds then available. 5  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2009 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." 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. Unpaid real property taxes become a lien upon said property on October 1 of each year. 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 6  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2009 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; although, the County expects such amounts, if any, to be immaterial. 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. Long Term Obligations 1. General Obligation Bonds The government issues general obligation bonds to provide for the acquisition and construction of major capital facilities. County General Obligation Limited Tax Bonds of 1987 – bonds in the amount of $400,000 were issued July 1, 1987, to provide funds for the purpose of securing and developing industry within Ottawa County. 7  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2009 General obligation bonds are direct obligations and pledge the full faith and credit of the government. These bonds are required to be fully paid within 25 years from the date of issue. General obligation bonds currently outstanding are as follows: Original Purpose Interest Rate Amount Ottawa County General Obligation 6.00% $400,000 Bonds of 1987 Amount Beginning Ending due within Balance Additions Reductions Balance one year $145,000 $ -0- $15,000 $130,000 $15,000 During fiscal year 2009, payments included $15,000 for principal and $8,261 for interest. Annual debt service requirements to maturity for general obligation bonds, including interest of 6.00%, are as follows: Fiscal Year Ending June 30, Principal Interest Total 2010 $ 15,000 $ 7,800 $ 22,800 2011 15,000 6,900 21.900 2012 15,000 6,000 21,000 2013-2017 75,000 16,500 91,500 2018 15,000 600 10,600 Total $130,000 $37,800 $167,800 E. Sales Tax On September, 15, 1992, Ottawa County voters approved a permanent one-half cent sales tax. The purpose of the tax is the construction, maintenance, and operation of a modern jail facility and operation of the Ottawa County Sheriff’s Department. The one-half cent sales tax is apportioned to the County General Fund for the operation of the Sheriff’s Department. On November 3, 1998, Ottawa County voters approved a permanent on-half cent sales tax effective January 1, 1999, for the construction, operation, and maintenance of the county road and bridge system of Ottawa County, Oklahoma. The one-half cent sales tax is apportioned to the Highway ½ Cent Sales Tax fund for the designated purpose. 8  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2009 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. The one-tenth of one percent sales tax is apportioned to the Firefighters Sales Tax fund for the designated purpose. 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 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 be earlier. The one-fourth of one percent sales tax is apportioned to the Courthouse Building Authority Sales Tax fund for the designated purpose. F. Reclassification Due to the reclassification of funds for fiscal year ending June 30, 2009, the beginning balance as reported is different than the June 30, 2008 ending balance. The difference is due to the Courthouse Building Authority fund being classified as a trust and agency that should have been county funds resulting in an increase of $326,961. Prior year ending balance, as reported $4,287,871 Fund reclassified to County Funds 326,961 Prior year ending balance, as restated $4,614,832 9 OTHER SUPPLEMENTARY INFORMATION  OTTAWA COUNTY, OKLAHOMA COMPARATIVE SCHEDULE OF RECEIPTS, EXPENDITURES, AND CHANGES IN CASH BALANCES—BUDGET AND ACTUAL—BUDGETARY BASIS— GENERAL FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2009 General Fund Budget Actual Variance Beginning Cash Balances $ 1,151,234 $ 1,151,234 $ - Less: Prior Year Outstanding Warrants (139,020) (139,020) - Less: Prior Year Reserves (471,369) (465,892) 5,477 Beginning Cash Balances, Budgetary Basis 540,845 546,322 5,477 Receipts: Ad Valorem Taxes 1,100,643 1,160,065 59,422 Charges for Services 394,324 407,407 13,083 Intergovernmental Revenues 1,248,819 770,008 (478,811) Sales Tax 1,003,890 1,147,719 143,829 Miscellaneous Revenues 91,553 240,807 149,254 Total Receipts, Budgetary Basis 3,839,229 3,726,006 (113,223) Expenditures: District Attorney 4,000 3,918 82 County Sheriff 1,140,155 1,139,699 456 Capital Outlay 66,641 66,641 - County Treasurer 163,067 162,865 202 County Commissioners 36,252 32,809 3,443 OSU Extension 53,115 53,114 1 County Clerk 268,858 268,150 708 Court Clerk 515,011 515,006 5 County Assessor 166,866 165,377 1,489 Revaluation of Real Property 113,223 113,207 16 General Government 740,510 732,116 8,394 Capital Outlay 841,753 654,038 187,715 Excise-Equalization Board 2,288 2,274 14 County Election Board 129,091 126,724 2,367 Capital Outlay 3,453 2,972 481 Emergency Management 68,211 61,786 6,425 Capital Outlay 30,439 17,327 13,112 County Cemetary 500 - 500 Free Fair 9,500 9,495 5 County Audit Budget Account 23,141 - 23,141 Provisions for interest on warrants 4,000 1,094 2,906 Total Expenditures, Budgetary Basis 4,380,074 4,128,612 251,462 Continued on next page 10  OTTAWA COUNTY, OKLAHOMA COMPARATIVE SCHEDULE OF RECEIPTS, EXPENDITURES, AND CHANGES IN CASH BALANCES—BUDGET AND ACTUAL—BUDGETARY BASIS— GENERAL FUND - CONTINUED FOR THE FISCAL YEAR ENDED JUNE 30, 2009 General Fund Continued from previous page Budget Actual Variance Excess of Receipts and Beginning Cash Balances Over Expenditures, Budgetary Basis $ - 143,716 $ 143,716 Reconciliation to Statement of Receipts, Disbursements, and Changes in Cash Balances Add: Estopped Warrants 276 Add: Current Year Reserves 11,314 Add: Current Year Outstanding Warrants 169,542 Ending Cash Balance $ 324,848 11  OTTAWA COUNTY, OKLAHOMA COMPARATIVE SCHEDULE OF RECEIPTS, EXPENDITURES, AND CHANGES IN CASH BALANCES—BUDGET AND ACTUAL—BUDGETARY BASIS— COUNTY HEALTH DEPARTMENT FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2009 County Health Department Fund Budget Actual Variance Beginning Cash Balances $ 155,174 $ 155,173 $ (1) Less: Prior Year Outstanding Warrants (21,164) (21,164) - Less: Prior Year Encumbrances (36,630) (36,307) 323 Beginning Cash Balances, Budgetary Basis 97,380 97,702 322 Receipts: Ad Valorem Taxes 165,526 174,461 8,935 Miscellaneous Revenues 43,978 49,596 5,618 Total Receipts, Budgetary Basis 209,504 224,057 14,553 Expenditures: Health and Welfare 266,884 210,790 56,094 Capital Outlay 40,000 28,860 11,140 Total Expenditures, Budgetary Basis 306,884 239,650 67,234 Excess of Receipts and Beginning Cash Balances Over Expenditures, Budgetary Basis $ - 82,109 $ 82,109 Reconciliation to Statement of Receipts, Disbursements, and Changes in Cash Balances Add: Current Year Encumbrances 18,695 Add: Current Year Outstanding Warrants 21,880 Ending Cash Balance $ 122,684 12  OTTAWA COUNTY, OKLAHOMA COMBINING STATEMENT OF RECEIPTS, DISBURSEMENTS, AND CHANGES IN CASH BALANCES—REGULATORY BASIS— REMAINING AGGREGATE FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Beginning Ending Cash Balances Receipts Cash Balances July 1, 2008 Apportioned Disbursements June 30, 2009 Remaining Aggregate Funds: District 1 D.E.Q. Settlement $ 18,044 $ - $ 5,828 $ 12,216 Resale 79,214 114,335 151,735 41,814 Sheriff Service Fee 152,410 259,994 312,022 100,382 Sheriff DARE 161 - - 161 Sheriff DFCF 681 - - 681 County Clerk Lien Fee 13,489 13,374 20,940 5,923 County Treasurer Mortgage Certificate Fee 11,160 7,026 11,251 6,935 County Clerk Records Preservation 39,644 35,815 55,003 20,456 CDBG RWD6 - 75,430 188,532 (113,102) CDBG IBC Bank - 170,850 170,850 - Sheriff Commissary 14,428 79,206 80,458 13,176 Sheriff Drug Buy 2,750 500 2,000 1,250 Sheriff Bond Fee 11,845 20,456 19,221 13,080 Child Abuse Prevention 6,381 949 82 7,248 Board of Prisoners 81,016 545,158 486,745 139,429 County Assessor Revolving 16,341 4,230 5,159 15,412 Insurance Recovery Cash Fund 8 - - 8 Combined Total - Remaining Aggregate Funds $ 447,572 $ 1,327,323 $ 1,509,826 $ 265,069 13  OTTAWA COUNTY, OKLAHOMA NOTES TO OTHER SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2009 1. Budgetary Schedules The Comparative Schedules of Receipts, Expenditures, and Changes in Cash Balances—Budget and Actual—Budgetary Basis for the General Fund and the County Health Department 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 Combined Statement of Receipts, Disbursements, and Changes in Cash Balances with Combining Information 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. 2. Remaining County Funds Remaining aggregate funds as presented on the financial statement are as follows: District 1 D.E.Q. Settlement – revenues are from reimbursements from the Environmental Protection Agency plus interest earnings and disbursements are for the rebuilding of roads damaged in District 1. Resale – revenues are from interest and penalties on ad valorem taxes paid late plus sale of county property. Disbursements are to offset the expense of collection of delinquent ad valorem taxes. Sheriff Service Fee – revenues are from fees charged for serving summons and notices. Disbursements are for any lawful expense of the Sheriff’s office. Sheriff DARE – revenues are from donations for drug education. Disbursements are for payroll of officers who go into schools and teach Drug Abuse Resistance Education. Sheriff DFCF – revenues are from monies seized and forfeited to the Sheriff’s office. Disbursements are for the maintenance and operation of the Sheriff’s Drug Task Force. County Clerk Lien Fee – revenues are from a fee charged by the County Clerk for filing liens. Disbursements are for any lawful expense of the County Clerk’s office. County Treasurer Mortgage Certificate Fee – revenues are from a fee for certifying mortgages. Disbursements are for any lawful expense of the County Treasurer’s office. 14  OTTAWA COUNTY, OKLAHOMA NOTES TO OTHER SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2009 County Clerk Records Preservation – revenues are from a fee charged by the County Clerk for recording instruments. Disbursements are for the maintenance and preservation of public records. CDBG RWD6 – accounts for federal and state funding to replace water lines in Rural Water District 6. CDBG IBC Bank – accounts for federal and state funding for the purchase of IBC Bank Building for courthouse annex. Sheriff Commissary – revenues are from profits of commissary sales in the County jail. Disbursements are for jail improvements. Sheriff Drug Buy – revenues are from the sale of seized and forfeited property sold at auction. Disbursements are for drug prevention. Sheriff Bond Fee – revenues are from a fee charged to all persons who post a surety bond and are subsequently incarcerated. Disbursements are for any legal expense of the jail. Child Abuse Prevention – revenues are from jury donations and interest earnings. Disbursements are for child abuse prevention. Board of Prisoners – revenues are 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. County Assessor Revolving – revenues are from any and all fees collected by the County Assessor plus interest earnings. Disbursements are to maintain electronic databases and geographic information systems in the Assessor’s office. Insurance Recovery Cash Fund – revenues are from insurance claims filed by the County. Disbursements are for the replacement of items damaged in the courthouse. 15 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 TO THE OFFICERS OF OTTAWA COUNTY, OKLAHOMA We have audited the combined totals—all funds of the accompanying Combined Statement of Receipts, Disbursements, and Changes in Cash Balances of Ottawa County, Oklahoma, as of and for the year ended June 30, 2009, which comprises Ottawa County’s basic financial statement, prepared using accounting practices prescribed or permitted by Oklahoma state law, and have issued our report thereon dated April 28, 2014. Our report on the basic financial statement was adverse because the statement is not a presentation in conformity with 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 for the year ended June 30, 2009, on the basis of accounting prescribed by Oklahoma state law, described in Note 1. 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered Ottawa County’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statement, but not for the purpose of expressing an opinion on the effectiveness of the County’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of Ottawa County’s internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses, and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as described in the accompanying schedule of findings and responses, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses and other deficiencies that we consider to be 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 in internal control described in the accompanying schedule of findings and responses to be material weaknesses in internal control over financial reporting. 2009-02 and 2009-03. 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 in internal control described in the accompanying schedule of findings and responses to be significant deficiencies in internal control over financial reporting. 2009-01. Compliance and Other Matters As part of obtaining reasonable assurance about whether Ottawa County’s financial statement is free of 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 determination of financial statement amounts. 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 no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted a certain matter that we reported to the management of Ottawa County, which is included in Section 2 of the schedule of findings and responses contained in this report. Ottawa County’s responses to the findings identified in our audit are described in the accompanying schedule of findings and responses. We did not audit Ottawa County’s responses and, accordingly, we express no opinion on the responses. This report is intended solely for the information and use of management, those charged with governance, others within the entity, and is not intended to be and should not be used by anyone other than the specified parties. This report is also 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. GARY A. JONES, CPA, CFE OKLAHOMA STATE AUDITOR & INSPECTOR April 28, 2014 17  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2009 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 2009-01 – Cash Balance Deficit Condition: We noted the CDBG RWD 6 fund carried a negative balance of $113,101.76 at the end of the fiscal year ended June 30, 2009. This is an indication warrants were issued and paid without cash being available in the respective fund. Cause of Condition: Funds were not verified prior to issuing and registering warrants. Effect of Condition: These conditions resulted in a negative balance on the County’s financial statements. Recommendation: The Oklahoma State Auditor & Inspector’s Office (OSAI) strongly recommends the County Treasurer verify cash is available in the fund prior to the registration of any warrants. If money is not available, the County Treasurer must either refuse to register the warrant or issue non-payable warrants. Management Response: County Treasurer: These were federal funds that had to be expended before reimbursement could be made. The Rural Water District 6 was awarded a $250,000.00 grant. When the award letter was received that amount was put on the books and after expended a request was sent for the release of funds. Auditor Response: State statutes do not permit the expenditure of funds in excess of the fund cash balance. Criteria: Safeguarding controls are an aspect of internal control. Safeguarding controls relate to the prevention or timely detection of unauthorized transactions and unauthorized access to assets. Failure to perform tasks that are part of internal controls, such as verifying that there is sufficient cash on hand prior to registering warrants are deficiencies in internal control. Further, Title 62 O.S. § 551 states in part, “… It shall be the duty of the treasurer to pay on presentation any check or warrant, when there is cash sufficient in such fund to do so…” Finding 2009-02 – Inadequate Internal Controls Over the Payroll Process Condition: We noted the following weaknesses regarding the payroll process:  The duties of processing payroll are not adequately segregated. The Payroll Clerk enrolls new employees, reviews the payroll claims, calculates amounts to be paid to the employees and payroll related agencies, reviews amounts issued to the employees and payroll related agencies, 18  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2009 updates the master payroll file, issues payroll, prints payroll warrants and removes terminated employees from the system. Cause of Condition: Procedures with regard to segregating the duties over the payroll process has not been designed due to the officials being unaware of the necessity of such procedures. Effect of Condition: A single person having responsibility for more than area of recording, authorization, custody of assets, and execution of transactions could result in unrecorded transactions, misstated financial reports, clerical errors, or misappropriations of funds not being detected in a timely manner. Recommendation: OSAI recommends 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 approve accounting functions. Management Response: County Clerk: It is the desire of the Ottawa County Clerk’s Office to perform all duties as prescribed by the Oklahoma State Auditor & Inspector. However, due to lack of funds, it is not possible to totally segregate all the duties. We are cognizant of the problem and will manage it to the best of our ability. Criteria: Accountability and stewardship are overall goals of management in the accounting of funds. To help ensure a proper accounting of funds, key duties and responsibilities should be segregated among different individuals to reduce the risk of error or fraud and accurate time and payroll records should be maintained, reviewed, and retained. No one individual should have the ability to authorize transactions, have physical custody of assets, and record transactions. Finding 2009-03 – Inadequate Segregation of Duties Over the Collection Process – County Treasurer Condition: The following weaknesses were noted regarding the collection process:  The duties of issuing receipts, voiding receipts, accepting cash, reconciling the cash drawer and preparing the deposit were not adequately segregated within the County Treasurer’s office which is the office primarily responsible for safeguarding collections. Cause of Condition: Procedures have not been designed and implemented with regard to segregating the duties over all aspects of the receipting process and cash balances process due to officials being unaware of the need for such procedures. Effect of Condition: A single person having responsibility for more than area of recording, authorization, custody of assets, and execution of transactions could result in unrecorded transactions, misstated financial reports, clerical errors, or misappropriations of funds not being detected in a timely manner. 19  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Recommendation: OSAI recommends management be aware of these conditions and realize that a concentration of duties and responsibility in a limited number of individuals is not desired from a control point of view. The most effective procedures lie in managements overseeing of office operations and a periodic review of operations. OSAI recommends management provide segregation of duties so that one employee is unable to perform all accounting functions. In the event that segregation of duties is not possible due to limited personnel, OSAI recommends implementing compensating procedures to mitigate the risks involved with a concentration of duties. Compensating procedures would include separating key processes and/or critical functions of the office, and having management review and approval of accounting functions. Management Response: County Treasurer: The County does not have enough funding to properly segregate all functions within the Treasurer’s office. We will implement compensating controls to mitigate the risks involved with a concentration of duties. This will include maintaining documentation where receipts are reconciled to deposits, and an independent verification of all reconciliations. Criteria: Accountability and stewardship are overall goals of management in the accounting of funds. To help ensure a proper accounting of funds, key duties and responsibilities should be segregated among different individuals to reduce the risk of error or fraud. No one individual should have the ability to authorize transactions, have physical custody of assets, and record transactions. SECTION 2—This section contains a certain matter not required to be reported in accordance with Government Auditing Standards. However, we believe this matter is significant enough to bring to management’s attention. We recommend that management consider this matter and take appropriate corrective action. Finding 2009-04 – Inadequate Internal Controls Over Signature Stamps – Court Clerk Condition: Upon inquiry and observation, it was noted that the Ottawa County District Judge’s signature stamp is maintained and used by the Court Clerk’s office. Cause of Condition: Procedures have not been designed to ensure signature stamps are used only by the owner. Effect of Condition: This condition could result in clerical errors that are not detected in a timely manner, and/or misappropriation of funds. In addition, unauthorized use of the signature stamps could result in improper authorizations, and checks being fraudulently issued. Recommendation: OSAI recommends signature stamps be used only by the official. Officials who utilize signature stamps should ensure that signature stamps are adequately safeguarded from unauthorized use. 20  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Management Response: Court Clerk: We only use the Judge’s stamp when the original documents are signed by the Judge. The stamp is used on the Attorney’s copies only. The Judge does not sign the copies because at times there are too many copies. To resolve this matter we are giving the Judge’s signature stamp to the bailiff. Auditor Response: Signature stamps should be used only by the official and adequately safeguarded from unauthorized use. Criteria: An aspect of internal controls is the safeguarding of assets. 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 or timely detection of unauthorized access, authorization, acquisition, use, or disposition of the entity’s assets and safeguard assets from loss, damage, or misappropriation. 21 OFFICE OF THE STATE AUDITOR & INSPECTOR 2300 N. LINCOLN BOULEVARD, ROOM 100 OKLAHOMA CITY, OK 73105-4896 WWW.SAI.OK.GOV