COUNTY AUDIT Ottawa County For the fiscal year ended June 30, 2010 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, 2010 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, 2010. 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, 2010 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 Schedule of Expenditures of Federal Awards ...................................................................................... 16 Note to the Schedule of Expenditures of Federal Awards.................................................................... 17 i  OTTAWA COUNTY, OKLAHOMA FOR THE FISCAL YEAR ENDED JUNE 30, 2010 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 ................................................................................................................. 18 Independent Auditor's Report on Compliance With Requirements That Could Have a Direct and Material Effect on Each Major Program and Internal Control Over Compliance in Accordance With OMB Circular A-133 ..................................................................................................... 20 Schedule of Findings and Questioned Costs ............................................................................................... 22 Schedule of Prior Year Findings and Questioned Costs ............................................................................. 28 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, 2010 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, 2010 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 Elizabeth Sly 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, 2010 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. 84.25% County Health 2.03% County General Sinking 13.52% 0.20% 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 4.11 11.26 4.10 61.63 County Sinking 0.19 Wyandotte I-1 36.46 5.21 9.26 11.26 4.10 66.29 Quapaw I-14 35.78 5.11 - 11.26 4.10 56.25 Other Commerce I-18 35.56 5.08 - 11.26 4.10 56.00 Miami (City) 4.6 Miami I-23 35.70 5.10 12.67 11.26 4.10 68.83 Miami School District 23 EMS 3.07 Afton I-26 36.08 5.15 - 11.26 4.10 56.59 Fairland I-31 36.04 5.15 13.57 11.26 4.10 70.12 Neosho Valley I-17 35.46 5.07 15.91 11.26 4.10 71.80 v  OTTAWA COUNTY, OKLAHOMA ASSESSED VALUE OF PROPERTY TREND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Estimated Valuation Public Real Homestead Fair Market Date Personal Service Estate Exemption Net Value Value 1/1/2009 $23,624,031 $15,783,508 $90,754,875 $7,782,487 $122,379,927 $1,073,508,132 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 Estimated $1,100,000,000 Fair Market Value $1,073,508,132 $1,050,000,000 $1,037,132,746 $1,031,549,316 $1,000,000,000 $982,608,640 $950,000,000 $934,868,096 $900,000,000 $850,000,000 1/1/2005 1/1/2006 1/1/2007 1/1/2008 1/1/2009 vi  OTTAWA COUNTY, OKLAHOMA COUNTY PAYROLL EXPENDITURES ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 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, 2010. 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 District 1 District 2 District 3 County Sheriff Treasurer Payroll Dollars $495,690 $575,350 $531,092 $1,412,986 $140,361 Payroll Expenditures by Department $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $- County General Election Board County Clerk Court Clerk Assessor Government Payroll Dollars $201,496 $116,014 $144,121 $275,441 $463,204 vii  OTTAWA COUNTY, OKLAHOMA COUNTY GENERAL FUND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 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 2006 FYE 2007 FYE 2008 FYE 2009 FYE 2010 Receipts Apportioned $2,851,114 $2,966,592 $3,305,213 $3,726,006 $3,633,893 Disbursements $2,955,898 $2,794,608 $2,916,423 $4,552,392 $3,394,516 viii  OTTAWA COUNTY, OKLAHOMA COUNTY HIGHWAY FUND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 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 2006 FYE 2007 FYE 2008 FYE 2009 FYE 2010 Receipts Apportioned $2,189,659 $2,244,132 $2,673,764 $2,871,912 $2,427,793 Disbursements $2,171,556 $1,981,087 $2,531,382 $2,650,765 $2,550,322 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, 2010, 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, 2010, 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, 2010, 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 accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the financial statement. The remaining 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, 2010 Beginning Ending Cash Balances Receipts Cash Balances July 1, 2009 Apportioned Disbursements June 30, 2010 Combining Information: Major Funds: County General Fund $ 324,848 $ 3,633,893 $ 3,394,516 $ 564,225 County Sales Tax 1,882 6 - 1,888 County Health 122,684 232,701 208,955 146,430 BIA/Highway 4,566,776 57,695 72,985 4,551,486 Highway 1,483,108 2,427,793 2,550,322 1,360,579 Highway 1/2 Cent Sales Tax 1,564,543 1,318,505 1,939,397 943,651 Courthouse Building Authority Sales Tax 401,448 577,510 864,564 114,394 MIDA Rawlins Sinking 38,851 19,332 22,351 35,832 Firefighters Sales Tax 243,644 222,557 228,101 238,100 Board of Prisoners 139,429 598,053 513,575 223,907 Severe Repetitive Loss Grant - 785,009 717,510 67,499 Remaining Aggregate Funds 125,640 845,251 579,656 391,235 Combined Total - All County Funds $ 9,012,853 $ 10,718,305 $ 11,091,932 $ 8,639,226 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, 2010 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) 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, 2010 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. 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. Severe Repetitive Loss Grant – revenues are from a Hazard Mitigation grant. Disbursements are used to buyout subdivision for flooding loss. 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 5  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2010 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. 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. 6  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2010 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; 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. 7  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2010 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. 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 $130,000 $ -0- $15,000 $115,000 $15,000 During fiscal year 2010, payments included $15,000 for principal and $7,351 for interest. Annual debt service requirements to maturity for general obligation bonds, including interest of 6.00%, are as follows: Fiscal Year Ending Principal Interest Total June 30, 2011 $ 15,000 $ 6,900 $ 21,900 2012 15,000 6,000 21,000 2013 15,000 5,100 20,100 2014 15,000 4,200 19,200 2015-2017 55,000 7,800 62,800 Total $115,000 $30,000 $145,000 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, 2010 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 fund for the designated purpose. 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, 2010 General Fund Budget Actual Variance Beginning Cash Balances $ 324,848 $ 324,848 $ - Less: Prior Year Outstanding Warrants (169,542) (169,542) - Less: Prior Year Reserves (11,314) (9,298) 2,016 Add: Estopped Warrants - 611 611 Beginning Cash Balances, Budgetary Basis 143,992 146,619 2,627 Receipts: Ad Valorem Taxes 1,139,237 1,235,640 96,403 Charges for Services 376,540 309,157 (67,383) Intergovernmental Revenues 871,980 595,143 (276,837) Sales Tax 1,032,947 1,098,448 65,501 Miscellaneous Revenues 41,091 395,505 354,414 Total Receipts, Budgetary Basis 3,461,795 3,633,893 172,098 Expenditures: District Attorney 4,000 255 3,745 County Sheriff 1,209,088 1,208,578 510 Capital Outlay 85,485 85,485 - County Treasurer 171,921 139,137 32,784 County Commissioners 36,252 33,233 3,019 OSU Extension 55,513 54,836 677 County Clerk 278,809 278,218 591 Court Clerk 423,113 422,006 1,107 County Assessor 171,120 155,091 16,029 Revaluation of Real Property 118,174 118,140 34 General Government 486,892 463,327 23,565 Capital Outlay 270,605 157,624 112,981 Excise-Equalization Board 2,438 2,218 220 County Election Board 129,837 125,650 4,187 Capital Outlay 4,396 1,396 3,000 Emergency Management 71,237 64,562 6,675 Capital Outlay 32,750 27,127 5,623 County Cemetary 500 11 489 Free Fair 9,500 9,459 41 County Audit Budget Account 36,157 - 36,157 Provisions for interest on warrants 8,000 9,820 (1,820) Total Expenditures, Budgetary Basis 3,605,787 3,356,173 249,614 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, 2010 General Fund Continued from previous page Budget Actual Variance Excess of Receipts and Beginning Cash Balances Over Expenditures, Budgetary Basis $ - 424,339 $ 424,339 Reconciliation to Statement of Receipts, Disbursements, and Changes in Cash Balances Add: Current Year Reserves 8,875 Add: Current Year Outstanding Warrants 131,011 Ending Cash Balance $ 564,225 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, 2010 County Health Department Fund Budget Actual Variance Beginning Cash Balances $ 122,684 $ 122,684 $ - Less: Prior Year Outstanding Warrants (21,880) (21,879) 1 Less: Prior Year Encumbrances (18,695) (18,613) 82 Beginning Cash Balances, Budgetary Basis 82,109 82,192 83 Receipts: Ad Valorem Taxes 171,331 185,827 14,496 Miscellaneous Revenues 41,891 46,874 4,983 Total Receipts, Budgetary Basis 213,222 232,701 19,479 Expenditures: Health and Welfare 265,331 175,962 89,369 Capital Outlay 30,000 6,350 23,650 Total Expenditures, Budgetary Basis 295,331 182,312 113,019 Excess of Receipts and Beginning Cash Balances Over Expenditures, Budgetary Basis $ - 132,581 $ 132,581 Reconciliation to Statement of Receipts, Disbursements, and Changes in Cash Balances Add: Current Year Encumbrances 5,670 Add: Current Year Outstanding Warrants 8,179 Ending Cash Balance $ 146,430 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, 2010 Beginning Ending Cash Balances Receipts Cash Balances July 1, 2009 Apportioned Disbursements June 30, 2010 Remaining Aggregate Funds: District 1 D.E.Q. Settlement $ 12,216 $ - $ 12,216 $ - Resale 41,814 173,933 95,013 120,734 Sheriff Service Fee 100,382 324,639 255,292 169,729 Sheriff DARE 161 - - 161 Sheriff DFCF 681 12,239 12,857 63 County Clerk Lien Fee 5,923 10,649 6,125 10,447 County Treasurer Mortgage Certificate Fee 6,935 5,688 8,085 4,538 County Clerk Records Preservation 20,456 31,865 33,163 19,158 CDBG RWD6 (113,102) 176,744 63,642 - Sheriff Commissary 13,176 61,469 52,645 22,000 Sheriff Drug Buy 1,250 3,000 4,000 250 Sheriff Bond Fee 13,080 22,687 14,974 20,793 Child Abuse Prevention 7,248 96 182 7,162 County Assessor Revolving 15,412 3,542 2,762 16,192 Insurance Recovery Cash Fund 8 - - 8 Repetitive Flood Claims Grant (RFC) - 18,700 18,700 - Combined Total - Remaining Aggregate Funds $ 125,640 $ 845,251 $ 579,656 $ 391,235 13  OTTAWA COUNTY, OKLAHOMA NOTES TO OTHER SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2010 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, 2010 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. 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. 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. Repetitive Flood Claims Grant (RFC) – revenues are from the County’s Hazard Mitigation Grant. Disbursements are for qualifying participants in Ottawa County with repetitively sustained flood damage to their property. 15 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Federal Pass-Through Federal Grantor/Pass-Through CFDA Grantor's Federal Grantor/Program Title Number Number Expenditures U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Passed Through the Oklahoma Department of Commerce: Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii 14.228 CDBG 12883 $ 63,642 Total U.S. Department of Housing and Urban Development 63,642 U.S. DEPARTMENT OF JUSTICE Direct Grant: Edward Byrne Memorial Justice Assistance Grant Program 16.738 18,543 Total U.S. Department of Justice 18,543 U.S. DEPARTMENT OF HOMELAND SECURITY Passed Through the Oklahoma Department of Emergency Management: Disaster Grants - Public Assistance (Presidentially Declared Disasters) 97.036 DR-1876, DR-1883 575,798 Hazard Mitigation Grant 97.039 SRL-PJ-06 OK-2008-011 703,465 Hazard Mitigation Grant 97.039 RFC-PJ-06 OK-2009-002 18,729 Emergency Management Preparedness Grants 97.042 10,000 Total U.S. Department of Homeland Security 1,307,992 Total Expenditures of Federal Awards $ 1,390,177 16  OTTAWA COUNTY, OKLAHOMA NOTE TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Basis of Presentation The schedule of expenditures of federal awards includes the federal grant activity of Ottawa County, and is presented on the cash basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. 17 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, 2010, 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, 2010, 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 questioned costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses. 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 questioned costs to be material weaknesses in internal control over financial reporting. 2010-01 and 2010- 02. 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 questioned costs contained in this report. Ottawa County’s responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. 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 19  Independent Auditors Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and Internal Control Over Compliance in Accordance With OMB Circular A-133 TO THE OFFICERS OF OTTAWA COUNTY, OKLAHOMA Compliance We have audited the compliance of Ottawa County, Oklahoma, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on Ottawa County’s major federal program for the year ended June 30, 2010. Ottawa County’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to its major federal programs is the responsibility of Ottawa County’s management. Our responsibility is to express an opinion on Ottawa County’s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Ottawa County’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of Ottawa County’s compliance with those requirements. In our opinion, Ottawa County, complied, in all material respects, with the requirements referred to above that could have a direct and material effect on its major federal programs for the year ended June 30, 2010. However, the results of our auditing procedures disclosed an instance of noncompliance with those requirements, which is required to be reported in accordance with OMB Circular A-133 and which is described in the accompanying schedule of findings and questioned costs as item 2010-3. Internal Control Over Compliance Management of Ottawa County is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered Ottawa County’s internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Ottawa County’s internal control over compliance. Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance 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 discussed below, we identified certain deficiencies in internal control over compliance that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. We consider the deficiency in internal control over compliance described in the accompanying schedule of findings and questioned costs as item 2010-4 to be a material weakness. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. We consider the deficiency in internal control over compliance, described in the accompanying schedule of findings and questioned costs, as item 2010-3 to be a significant deficiency. Ottawa County’s responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. 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., section 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 21  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 SECTION 1—Summary of Auditor’s Results Financial Statements Type of auditor's report issued: ......................Adverse as to GAAP; unqualified as to statutory presentation Internal control over financial reporting:  Material weakness(es) identified?................................................................................................ Yes  Significant deficiency(ies) identified? .......................................................................................... No Noncompliance material to financial statements noted? ............................................................................ No Federal Awards Internal control over major programs:  Material weakness(es) identified?................................................................................................ Yes  Significant deficiency(ies) identified? ........................................................................................ Yes Type of auditor's report issued on compliance for major programs: ........................................................................................... Unqualified Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133? ....................................................................... Yes Identification of Major Programs CFDA Number(s) Name of Federal Program or Cluster 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) 97.039 Hazard Mitigation Grant Dollar threshold used to distinguish between Type A and Type B programs: .................................................................................................. $300,000 Auditee qualified as low-risk auditee? ....................................................................................................... No 22  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 SECTION 2—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 2010-01 – Inadequate Segregation of Duties Over the Collection Process – County Treasurer (Repeat Finding) 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 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: The Oklahoma State Auditor & Inspector’s Office (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. 23  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Finding 2010-02 – Inadequate Segregation of Duties and Internal Controls Over the Collection Process (Repeat Finding) 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. 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. 24  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 SECTION 3—Independent Auditor's Report on Compliance With Requirements That Could Have a Direct and Material Effect on Each Major Program and Internal Control Over Compliance in Accordance With OMB Circular A-133 Finding 2010-03 – Inadequate Internal Controls Over Compliance Requirement – Procurement and Suspension and Debarment – Hazard Mitigation Grant PASS-THROUGH GRANTOR: Oklahoma Department of Emergency Management FEDERAL AGENCY: U.S. Department of Homeland Security CFDA NO: 97.039 FEDERAL PROGRAM NAME: Hazard Mitigation Grant FEDERAL AWARD NUMBER: 1355 FEDERAL AWARD YEAR: 2010 CONTROL CATEGORY: Procurement and Suspension and Debarment QUESTIONED COSTS: $0 Condition: Ottawa County did not verify if vendors are debarred, suspended, proposed for debarment, or declared ineligible for the award of contracts by any Federal agency. Cause of Condition: Ottawa County does not have procedures in place to ensure vendors are not debarred, suspended, proposed for debarment, or declared ineligible for the award of contracts by any Federal agency. Effect of Condition: This condition resulted in noncompliance with federal grant compliance requirements. Further, Ottawa County may be liable for any Federal Awards received for reimbursement of a vendor who is debarred, suspended, proposed for debarment, or declared ineligible for the award of contracts by any Federal agency. Recommendation: OSAI recommends that Ottawa County develop procedures to ensure vendors are not debarred, suspended, proposed for debarment, or declared ineligible for the award of contracts by any Federal agency. Management Response: Board of County Commissioners: Now that we are aware of the requirement, we have made it a practice to prepare a List of Preferred Vendors for federal funds and check their qualifications @ www.epls.gov at the beginning of each fiscal year. Criteria: Federal A-133 Compliance Supplement Part Three states in part: “…entities are prohibited from contracting with or making sub awards under covered transactions to parties that are suspended or debarred…” 25  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Finding 2010-04 – Inadequate Internal Controls Over Schedule of Expenditures of Federal Awards - Disaster Grants - Public Assistance (Presidentially Declared Disasters) PASS-THROUGH GRANTOR: Oklahoma Department of Emergency Management FEDERAL AGENCY: U.S. Department of Homeland Security CFDA NO: 97.036 FEDERAL PROGRAM NAME: Disaster Grants - Public Assistance (Presidentially Declared Disasters) FEDERAL AWARD NUMBER: DR-1876, DR-1883 FEDERAL AWARD YEAR: 2008, 2009, 2010 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Cash Management; Matching, Level of Effort, Earmarking; Period of Availability of Federal Funds; Procurement and Suspension and Debarment; and Special Tests and Provisions QUESTIONED COSTS: $-0- Condition: During our audit we identified federal programs that were not listed accurately on the County’s Statement of Expenditures of Federal Awards (SEFA). Federal program 97.036, Disaster 1876 actual expenditures were $524,113 and the County reported $260,826. The County under reported the expenditures for Disaster 1876 by $263,287. Federal program 97.036, Disaster 1883 actual expenditures were $51,685 and the County reported $55,751. The County over reported the expenditures by $4,066. Cause of Condition: Ottawa County District’s 1, 2, and 3 did not provide the County Clerk’s office with accurate FEMA expenditures for fiscal year 2010. The County Clerk is specifically assigned to keep accurate records of federal awards received or expended by the County. Without accurate expenditures from the Districts’ the County Clerk cannot create an accurate Statement of Expenditures of Federal Awards. Effect of Condition: Lack of internal controls over major program expenditures could lead to erroneous reporting and/or material misstatement of the County’s Schedule of Expenditures of Federal Awards, and increases the potential for material noncompliance. Recommendation: We recommend that the Ottawa County Board of County Commissioners assign someone from each District the responsibility of keeping accurate records of federal awards received and expended and to provide these expenditures to the County Clerk’s office. Management Response: Board of County Commissioner’s: We will ensure that proper documentation will be supplied to the County Clerk to accurately complete the County’s Schedule of Expenditures of Federal Awards. County Clerk: Each County Commissioner’s Secretary has been made aware of the importance of supplying the Ottawa County Clerk’s Office with accurate records of federal funds received and expended. Without accurate numbers it is impossible for the County Clerk’s office to properly complete the SEFA. 26  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Criteria: OMB Circular A-133 §__.300 (a)(b) states that the auditee shall: (a) Identify, in its accounts, all Federal awards received and expended and the Federal programs under which they are received. Federal program and award identification shall include, as applicable the CFDA title and number, award number and year, name of the Federal agency, and name of the pass-through entity. (b) Maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs. SECTION 4—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 2010-05—Signature Stamps – Court Clerk (Repeat Finding) 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. 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. 27  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Finding 2008-11 – Schedule of Expenditures of Federal Awards (Repeat Finding) PASS-THROUGH GRANTOR: Oklahoma Department of Emergency Management FEDERAL AGENCY: U.S. Department of Homeland Security CFDA NO: 97.036 FEDERAL PROGRAM NAME: Disaster Grants - Public Assistance (Presidentially Declared Disasters) FEDERAL AWARD NUMBER: DR-1712, DR-1735, DR-1754, DR-1775 FEDERAL AWARD YEAR: 2008 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Cash Management; Matching, Level of Effort, Earmarking; Period of Availability of Federal Funds; Procurement and Suspension and Debarment; and Special Tests and Provisions QUESTIONED COSTS: $-0- FINDING SUMMARY: The County has not designed and implemented procedures for the reporting of its federal programs as required by OMB Circular A-133. Also, the County has not designed an accounting system or year-end process to accumulate and report its “in-kind” labor and equipment charges reported on the Schedule of Expenditures of Federal Awards. STATUS: Finding 2008-11 was not corrected, and resulted in similar finding 2010-4 Finding 2008-12 – FEMA Files – Documentation of Federal Expenditures PASS-THROUGH GRANTOR: Oklahoma Department of Emergency Management FEDERAL AGENCY: U.S. Department of Homeland Security CFDA NO: 97.036 FEDERAL PROGRAM NAME: Disaster Grants - Public Assistance (Presidentially Declared Disasters) FEDERAL AWARD NUMBER: DR-1712, DR-1735, DR-1754, DR-1775 FEDERAL AWARD YEAR: 2008 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Cash Management; Matching, Level of Effort, Earmarking; Period of Availability of Federal Funds; Procurement, Suspension and Debarment; and Special Tests and Provisions QUESTIONED COSTS: $611,991.72 FINDING SUMMARY: Districts 1, 2, and 3 were unable to provide adequate documentation to support the federal monies disbursed on disasters 1712, 1735, 1754, and 1775. Of the $611,991.72 in questioned costs, $101,622.48 was for disaster 1712, $413,202.33 was for disaster 1735, $36,891.62 was for disaster 1754, and $60,275.29 was for disaster 1775. STATUS: The County has taken steps to correct this issue. There were no findings of this nature noted in current year testing. Also, the federal agency or pass-through entity is not currently following up with the auditee on the audit finding, and a management decision was not issued by the federal agency or the pass- through entity. 28 OFFICE OF THE STATE AUDITOR & INSPECTOR 2300 N. LINCOLN BOULEVARD, ROOM 100 OKLAHOMA CITY, OK 73105-4896 WWW.SAI.OK.GOV