COUNTY AUDIT Ottawa County For the fiscal year ended June 30, 2015 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, 2015 This publication, issued by the Oklahoma State Auditor and Inspector’s Office as authorized by 19 O.S. § 171, has not been printed, but is available on the agency’s website (www.sai.ok.gov) and in the Oklahoma Department of Libraries Publications Clearinghouse Digital Prairie Collection (http://digitalprairie.ok.gov/cdm/search/collection/audits/) pursuant to 65 O.S. § 3-114. June 9, 2017 TO THE CITIZENS OF OTTAWA COUNTY, OKLAHOMA Transmitted herewith is the audit of Ottawa County, Oklahoma for the fiscal year ended June 30, 2015. 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, 2015 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 General Fund Analysis .................................................................................................................. vii County Highway Fund Analysis ............................................................................................................... viii 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 ....................................................................................... 4 Notes to the Financial Statement ............................................................................................................ 5 OTHER SUPPLEMENTARY INFORMATION Comparative Schedule of Receipts, Expenditures, and Changes in Cash Balances—Budget and Actual—Budgetary Basis—County General Fund ................................ 11 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, 2015 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 - viii PRESENTED FOR INFORMATIONAL PURPOSES ONLY  OTTAWA COUNTY, OKLAHOMA STATISTICAL INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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 county 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 – 32,105 (2015 est.) Farms – 1,020 Land in Farms – 193,251 Acres Primary Source: Oklahoma Almanac 2015-2016 iii  OTTAWA COUNTY OFFICIALS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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 Kathy Bowling Court Clerk Cassie Key District Attorney Eddie Wyant iv  OTTAWA COUNTY, OKLAHOMA AD VALOREM TAX DISTRIBUTION FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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. 80.62% County Health 1.99% EMS County General 3.97% 13.26% Multi-County Library 0.16% 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 2.98 11.26 4.10 60.50 County Sinking 0.13 Wyandotte I-1 36.46 5.21 6.37 11.26 4.10 63.40 County-Wide EMS 3.07 Quapaw I-14 35.78 5.11 - 11.26 4.10 56.25 Commerce I-18 35.56 5.08 - 11.26 4.10 56.00 Miami I-23 35.70 5.10 9.95 11.26 4.10 66.11 Afton I-26 36.08 5.15 - 11.26 4.10 56.59 Fairland I-31 36.04 5.15 12.30 11.26 4.10 68.85 Neosho Valley I-17 35.46 5.07 14.68 11.26 4.10 70.57 v  OTTAWA COUNTY, OKLAHOMA ASSESSED VALUE OF PROPERTY TREND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Estimated Valuation Public Real Homestead Fair Market Date Personal Service Estate Exemption Net Value Value 1/1/2014 $27,276,213 $16,912,145 $109,284,391 $8,020,107 $145,452,642 $1,214,490,192 1/1/2013 $24,822,824 $17,791,306 $104,622,120 $8,113,837 $139,122,413 $1,161,084,683 1/1/2012 $30,203,387 $18,449,042 $101,231,565 $7,972,403 $141,911,591 $1,170,091,887 1/1/2011 $24,950,481 $18,576,433 $97,483,267 $7,909,340 $133,100,841 $1,167,551,237 1/1/2010 $23,161,033 $16,477,423 $93,656,350 $7,976,382 $125,318,424 $1,099,284,421 Estimated $1,240,000,000 Fair Market $1,220,000,000 Value $1,214,490,192 $1,200,000,000 $1,180,000,000 $1,170,091,887 $1,167,551,237 $1,161,084,683 $1,160,000,000 $1,140,000,000 $1,120,000,000 $1,099,284,421 $1,100,000,000 $1,080,000,000 $1,060,000,000 $1,040,000,000 1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 vi  OTTAWA COUNTY, OKLAHOMA COUNTY GENERAL FUND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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. $3,700,000 $3,600,000 $3,500,000 $3,400,000 $3,300,000 $3,200,000 $3,100,000 $3,000,000 $2,900,000 $2,800,000 $2,700,000 FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015 Receipts Apportioned $3,283,375 $3,485,334 $3,477,961 $3,334,686 $3,589,576 Disbursements $3,227,157 $3,054,159 $3,369,931 $3,422,576 $3,506,740 vii  OTTAWA COUNTY, OKLAHOMA COUNTY HIGHWAY FUND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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. $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015 Receipts Apportioned $2,674,961 $2,239,352 $2,529,140 $2,142,028 $2,485,254 Disbursements $2,737,200 $2,385,590 $2,402,599 $2,409,095 $2,094,696 viii FINANCIAL SECTION  Independent Auditor’s Report TO THE OFFICERS OF OTTAWA COUNTY, OKLAHOMA Report on the Financial Statement 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, 2015, and the related notes to the financial statement, which collectively comprise the County’s basic financial statement as listed in the table of contents. Management’s Responsibility for the Financial Statement Management is responsible for the preparation and fair presentation of this financial statement in accordance with the regulatory basis of accounting described in Note 1, and for determining that the regulatory basis of accounting is an acceptable basis for the preparation of the financial statement in the circumstances. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles As described in Note 1 of the financial statement, the financial statement is prepared by Ottawa County using accounting practices prescribed or permitted by Oklahoma state law, which is a basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between the regulatory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. Adverse Opinion on U.S. Generally Accepted Accounting Principles In our opinion, because of the significance of the matter discussed in the “Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles” paragraph, the financial statement referred to above does not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of Ottawa County as of June 30, 2015, or changes in its financial position for the year then ended. Opinion on Regulatory Basis of Accounting 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, 2015, in accordance with the basis of accounting described in Note 1. Other Matters Other Information 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. The Other Supplementary Information, as listed in the table of contents, is the responsibility of management and was derived from and related directly to the underlying accounting and other records used to prepare the financial statement. Such information has been subjected to the auditing procedures applied in the audit of the financial statement and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statement or to the financial statement itself, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Other Supplementary Information, as listed in the table of contents, 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 subjected to the auditing procedures applied in the audit of the financial statement, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 8, 2017, on our consideration of Ottawa County’s internal control over financial reporting and on our tests of its 2 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 in considering Ottawa County’s internal control over financial reporting and compliance. GARY A. JONES, CPA, CFE OKLAHOMA STATE AUDITOR & INSPECTOR June 8, 2017 3 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, 2015 Beginning Ending Cash Balances Receipts Transfers Transfers Cash Balances July 1, 2014 Apportioned In Out Disbursements June 30, 2015 Combining Information: Major Funds: County General Fund $ 1,071,758 $ 3,589,576 $ - $ - $ 3,506,740 $ 1,154,594 County Sales Tax 1,888 - - - - 1,888 County Health 428,793 237,111 - - 186,289 479,615 Bureau of Indian Affairs (BIA) Highway 519,285 481,891 - - 1,001,176 - Highway 1,011,576 2,485,254 - - 2,094,696 1,402,134 Highway 1/2 Cent Sales Tax 681,142 1,923,725 - - 752,487 1,852,380 Courthouse Building Authority Sales Tax 478,140 587,970 - - 563,649 502,461 MIDA Rawlins Sinking 30,230 17,375 - - 17,850 29,755 Firefighters Sales Tax 260,937 235,466 - - 165,977 330,426 Board of Prisoners 171,263 190,971 - - 165,895 196,339 County Bridge and Road Improvement Fund 421,505 12,023 - - 57,093 376,435 Remaining Aggregate Funds 516,321 719,307 63 63 683,386 552,242 Combined Total - All County Funds $ 5,592,838 $ 10,480,669 $ 63 $ 63 $ 9,195,238 $ 6,878,269 The notes to the financial statement are an integral part of this statement. 4  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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 with revenues from ad valorem taxes, officer's fees, sales tax, interest earnings, and miscellaneous collections of the County. County Sales Tax – accounts for revenues 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 – accounts for 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. Bureau of Indian Affairs (BIA) Highway – accounts for money received for construction and improvement of roads and bridges on Indian land within the County. 5  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Highway – account for revenues from state imposed fuel taxes. Disbursements are for the maintenance and construction of county roads and bridges. Highway ½ Cent Sales Tax – accounts for the collections of sales tax revenue and the disbursement of funds are for the construction of county roads and bridges as restricted by the sales tax ballot. Courthouse Building Authority Sales Tax – accounts for the collections of sales tax revenue and the disbursement of funds are for the County Courthouse facilities and to pay the principal and interest on indebtedness on behalf of the County by the Ottawa County Governmental Building Authority as restricted by the sales tax ballot. MIDA Rawlins Sinking – accounts for revenues from ad valorem taxes and interest earnings. Disbursements are for the payment of principal and interest on bonds and judgments against the County. Firefighters Sales Tax – accounts for the collections of sales tax revenue and disbursement of funds are for general operation, maintenance, training, and construction of new fire department buildings or improvements to existing fire department buildings as restricted by the sales tax ballot. Board of Prisoners – accounts for revenues from fees charged for boarding prisoners of non-county entities in the county jail. Disbursements are for feeding and housing inmates of the county jail as restricted by statute. County Bridge and Road Improvement Fund – accounts for state money received for construction and/or improvement of bridges within the County. 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 in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) or on a regulatory basis. The County has elected to present their financial statement on a regulatory basis in conformity with Title 19 O.S. § 171. 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. 6  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 D. Budget Under current Oklahoma Statutes, a general fund and a county health department fund are the only funds required to adopt a formal budget. On or before the first Monday in July of each year, each officer or department head submits an estimate of needs to the governing body. The budget is approved for the respective fund by office, or department and object. The County Board of Commissioners may approve changes of appropriations within the fund by office or department and object. To increase or decrease the budget by fund requires approval by the County Excise Board. E. Cash and Investments For the purposes of financial reporting, “Ending Cash Balances, June 30” includes cash and cash equivalents and investments as allowed by statutes. The County pools the cash of its various funds in maintaining its bank accounts. However, cash applicable to a particular fund is readily identifiable on the County’s books. The balance in the pooled cash accounts is available to meet current operating requirements. State statutes require financial institutions with which the County maintains funds to deposit collateral securities to secure the County’s deposits. The amount of collateral securities to be pledged is established by the County Treasurer; this amount must be at least the amount of the deposit to be secured, less the amount insured (by, for example, the FDIC). The County Treasurer has been authorized by the County’s governing board to make investments. Allowable investments are outlined in statutes 62 O.S. § 348.1 and § 348.3. All investments must be backed by the full faith and credit of the United States Government, the Oklahoma State Government, fully collateralized, or fully insured. All investments as classified by state statute are nonnegotiable certificates of deposit. Nonnegotiable certificates of deposit are not subject to interest rate risk or credit risk. 2. Ad Valorem Tax The County's property tax is levied each October 1 on the assessed value listed as of January 1 of the same year for all real and personal property located in the County, except certain exempt property. Assessed values are established by the County Assessor within the prescribed guidelines established by the Oklahoma Tax Commission and the State Equalization Board. Title 68 O.S. § 2820.A. states, ". . . Each assessor shall thereafter maintain an active and systematic program of visual inspection on a continuous basis and shall establish an inspection schedule which will result in the individual visual inspection of all taxable property within the county at least once each four (4) years." 7  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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. Unpaid delinquent personal property taxes are published usually in May. If the taxes are not paid within 30 days from publication, they shall be placed on the personal tax lien docket. 3. Other Information A. Pension Plan Plan Description. The County contributes to the Oklahoma Public Employees Retirement Plan (the Plan), a cost-sharing, multiple-employer defined benefit pension plan administered by the Oklahoma Public Employees Retirement System (OPERS). Benefit provisions are established and amended by the Oklahoma Legislature. The Plan provides retirement, disability, and death benefits to Plan members and beneficiaries. Title 74, Sections 901 through 943, as amended, establishes the provisions of the Plan. OPERS issues a publicly available financial report that includes financial statements and supplementary information. That report may be obtained by writing OPERS, P.O. Box 53007, Oklahoma City, Oklahoma 73105 or by calling 1-800-733-9008. Funding Policy. The contribution rates for each member category are established by the Oklahoma Legislature and are based on an actuarial calculation which is performed to determine the adequacy of contribution rates. B. Other Post Employment Benefits (OPEB) In addition to the pension benefits described in the Pension Plan note, OPERS provides post- retirement health care benefits of up to $105 each for retirees who are members of an eligible group plan. These benefits are funded on a pay-as-you-go basis as part of the overall retirement benefit. OPEB expenditure and participant information is available for the state as a whole; however, information specific to the County is not available nor can it be reasonably estimated. C. Contingent Liabilities Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, primarily the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable fund. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time; 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. 8  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 D. Long Term Obligations 1. General Obligation Bonds The government issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Debt service on the bonds will be paid from ad valorem taxes levied and assessed on behalf of the issuer and deposited to the Sinking Fund. 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 $55,000 $-0- $15,000 $40,000 $15,000 During the fiscal year ended June 30, 2015, principal payments of $15,000 and interest payments of $2,850 were made on this issue. 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 2016 $15,000 $2,400 $17,400 2017 15,000 1,500 16,500 2018 10,000 600 10,600 Total $40,000 $4,500 $44,500 9  OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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. These funds are accounted for in the County General Fund. On November 3, 1998, Ottawa County voters approved a permanent one-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. These funds are accounted for in the Highway ½ Cent Sales Tax fund. On November 18, 2003, Ottawa County voters approved a one-tenth of one percent (1/10 of 1%) county sales tax in perpetuity and effective on or after April 1, 2004, which is to be used to fund the fire departments in Ottawa County, for purposes including, but not limited to equipment, general operations, maintenance, training and the construction of new fire department buildings or improvements to existing fire department buildings. These funds are accounted for in the Firefighter Sales Tax fund. On December 13, 2005, Ottawa County voters approved a one-fourth of one percent (1/4 of 1%) county sales tax for the sole purpose to pay for acquiring, constructing, equipping, repairing, renovating, operating, and maintaining county courthouse facilities for Ottawa County, Oklahoma; and to pay the principal and interest on indebtedness incurred on behalf of the County by the Ottawa County Governmental Building Authority for such purposes. The effective date of this tax is April 1, 2006, and shall expire and cease to be collected when sufficient funds have been collected from said levy to retire such indebtedness or on April 1, 2036, whichever shall occur earlier. These funds are accounted for in the Courthouse Building Authority Sales Tax fund. F. Residual Transfer A residual transfer in the amount of $63 was made from the Sheriff DFCF fund to Sheriff Service Fee fund to close out the Sheriff DFCF fund. 10 OTHER SUPPLEMENTARY INFORMATION  OOTAWA 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, 2015 General Fund Budget Actual Variance Beginning Cash Balances $ 1,071,759 $ 1,071,758 $ (1) Less: Prior Year Outstanding Warrants (133,701) (133,701) - Less: Prior Year Encumbrances (47,945) (46,623) 1,322 Beginning Cash Balances, Budgetary Basis 890,113 891,434 1,321 Receipts: Ad Valorem Taxes 1,623,776 1,431,044 (192,732) Charges for Services 68,226 316,262 248,036 Intergovernmental Revenues 535,763 638,951 103,188 Sales Tax 1,014,807 1,175,084 160,277 Miscellaneous Revenues 6,784 28,235 21,451 Total Receipts, Budgetary Basis 3,249,356 3,589,576 340,220 Expenditures: District Attorney 4,000 4,000 - County Sheriff 1,588,722 1,585,609 3,113 County Treasurer 148,209 147,796 413 County Commissioner 78,782 77,026 1,756 County Commissioner O.S.U. Extensions 71,673 71,046 627 County Clerk 295,182 295,083 99 Court Clerk 451,414 449,246 2,168 County Assessor 70,400 70,359 41 Revaluation of Real Property 220,380 220,379 1 General Government 955,386 325,284 630,102 Excise-Equalization Board 2,438 2,293 145 County Election Expense 134,926 133,576 1,350 Emergency Management 77,247 73,830 3,417 County Audit Budget Account 28,810 956 27,854 County Cemetery Account 400 400 - Free Fair Budget Account 9,500 8,928 572 Provision for Interest on Warrants 2,000 - 2,000 Total Expenditures, Budgetary Basis 4,139,469 3,465,811 673,658 Excess of Receipts and Beginning Cash Balances Over Expenditures, Budgetary Basis $ - 1,015,199 $ 1,015,199 Reconciliation to Statement of Receipts, Disbursements, and Changes in Cash Balances Add: Cancelled Warrants 165 Add: Current Year Outstanding Warrants 128,188 Add: Current Year Encumbrances 11,042 Ending Cash Balance $ 1,154,594 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, 2015 County Health Department Fund Budget Actual Variance Beginning Cash Balances $ 428,793 $ 428,793 $ - Less: Prior Year Outstanding Warrants (6,713) (6,713) - Less: Prior Year Encumbrances (5,172) (4,437) 735 Beginning Cash Balances, Budgetary Basis 416,908 417,643 735 Receipts: Ad Valorem Taxes 217,485 215,189 (2,296) Charges for Service - 15,973 15,973 Intergovernmental Revenues - 5,923 5,923 Miscellaneous revenues - 26 26 Total Receipts, Budgetary Basis 217,485 237,111 19,626 Expenditures: Health and Welfare 634,393 201,118 433,275 Total Expenditures, Budgetary Basis 634,393 201,118 433,275 Excess of Receipts and Beginning Cash Balances Over Expenditures, Budgetary Basis $ - 453,636 $ 453,636 Reconciliation to Statement of Receipts, Disbursements, and Changes in Cash Balances Add: Current Year Encumbrances 4,684 Add: Current Year Outstanding Warrants 21,295 Ending Cash Balance $ 479,615 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, 2015 Beginning Ending Cash Balances Receipts Transfer Transfer Cash Balances July 1, 2014 Apportioned In Out Disbursements June 30, 2015 Remaining Aggregate Funds: Resale $ 193,784 $ 167,112 $ - $ - $ 161,570 $ 199,326 Sheriff Service Fee 190,196 406,584 63 - 393,574 203,269 Sheriff Drug Abuse Resistance Education (DARE) 161 - - - 161 - Sheriff DFCF 63 - - 63 - - County Clerk Lien Fee 21,024 10,844 - - 18,267 13,601 County Treasurer Mortgage Certification Fee 2,433 4,145 - - 5,431 1,147 County Clerk Records Preservation 10,263 23,238 - - 16,697 16,804 Sheriff Commissary 50,166 64,962 - - 72,436 42,692 Sheriff Bond Fee 25,063 22,609 - - 14,502 33,170 Child Abuse Prevention 7,285 17 - - - 7,302 County Assessor Revolving 15,317 1,436 - - 740 16,013 Insurance Recovery Cash Fund 8 - - - 8 - Littering Reward Fund 558 100 - - - 658 Paradise Point - 10 - - - 10 Local Emergency Planning Committee - 1,000 - - - 1,000 Emergency Management Performance Grant - 15,000 - - - 15,000 Firefighters Miami - 2,225 - - - 2,225 Tulsa Teachers Credit Union - 25 - - - 25 Combined Total - Remaining Aggregate Funds $ 516,321 $ 719,307 $ 63 $ 63 $ 683,386 $ 552,242 13  OTTAWA COUNTY, OKLAHOMA NOTE TO FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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: Resale – accounts for the collection of interest and penalties on delinquent taxes and disbursement of funds as restricted by state statute. Sheriff Service Fee – accounts for revenues from fees charged for serving summons and notices. Disbursements are for any lawful expense of the Sheriff’s office. Sheriff Drug Abuse Resistance Education (DARE) – accounts for revenues from donations for drug education. Disbursements are for payroll of officers who go into schools and teach Drug Abuse Resistance Education. Sheriff DFCF – accounts for revenues 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 – accounts for revenues 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 Certification Fee – accounts for revenues from a fee for certifying mortgages. Disbursements are for any lawful expense of the County Treasurer’s office. County Clerk Records Preservation – accounts for revenues from a fee charged by the County Clerk for recording instruments. Disbursements are for the maintenance and preservation of public records. 14  OTTAWA COUNTY, OKLAHOMA NOTE TO FINANCIAL STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Sheriff Commissary – accounts for revenues from profits of commissary sales in the County jail. Disbursements are for jail improvements. Sheriff Bond Fee – accounts for revenues 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 – accounts for revenues from jury donations and interest earnings. Disbursements are for child abuse prevention. County Assessor Revolving – accounts for the collection of fees for copies and disbursements as restricted by state statute. Insurance Recovery Cash Fund – accounts for revenues from insurance claims filed by the County. Disbursements are for the replacement of items damaged in the courthouse. Littering Reward Fund – accounts for revenues from court clerk fees. Disbursements are for rewards paid to individuals providing information that leads to conviction of littering violators. Paradise Point – accounts for donations restricted for use of the Paradise Point Fire Department. Local Emergency Planning Committee – accounts for the receipt of funds from state and local governments and disbursed as restricted by the grant agreement. Emergency Management Performance Grant – accounts for grant money received from the Department of Homeland Security and disbursed as restricted by the grant agreement. Firefighters Miami – accounts for donations from the Ottawa County Miami Firefighters restricted for the use of Miami Fire Department. Tulsa Teachers Credit Union – accounts for county funds on deposit with the Tulsa Teachers Credit Union (TTCU) in order for the Sheriff to obtain a TCCU credit card to use for travel purposes. 15 INTERNAL CONTROL AND COMPLIANCE SECTION 17  Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards TO THE OFFICERS OF OTTAWA COUNTY, OKLAHOMA We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the combined total—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, 2015, and the related notes to the financial statement, which collectively 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 June 8, 2017. Our report included an adverse opinion on the financial statement because the statement is prepared using accounting practices prescribed or permitted by Oklahoma state law, which is a basis of accounting other than accounting principles generally accepted in the United States of America. However, our report also included our opinion that the financial statement does present fairly, in all material respects, the receipts, disbursements, and changes in cash balances – regulatory basis of the County for the year ended June 30, 2015, on the basis of accounting prescribed by Oklahoma state law, described in Note 1. Internal Control Over Financial Reporting In planning and performing our audit of the financial statement, we considered Ottawa County’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statement, but not for the purpose of expressing an opinion on the effectiveness of Ottawa County’s internal control. Accordingly, we do not express an opinion on the effectiveness of Ottawa County’s internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying schedule of findings to be material weaknesses: 2015-1, 2015- 2, and 2015-3. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described in the accompanying schedule of findings to be significant deficiencies: 2015-4, 2015-5, and 2015-6. Compliance and Other Matters As part of obtaining reasonable assurance about whether Ottawa County’s financial statement is free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the 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 certain matters regarding statutory compliance that we reported to the management of Ottawa County, which are included in Section 2 of the schedule of findings and responses contained in this report. Ottawa County’s Responses to Findings Ottawa County’s responses to the findings identified in our audit are described in the accompanying schedule of findings and responses. Ottawa County’s responses were not subjected to the auditing procedures applied in the audit of the financial statement and, accordingly, we express no opinion on it the responses. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 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 June 8, 2017 17  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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 2015-1- Inadequate County-Wide Controls (Repeat Finding) Condition: County-wide controls regarding risk assessment and monitoring have not been designed. Cause of Condition: Policies and procedures have not been designed and implemented to address risk assessment and monitoring of the County. The County was not fully aware of the benefits gained by the implementation of procedures regarding risk assessment and monitoring as it relates to the strengthening of its internal control structure. Effect of Condition: Without an adequate system of county-wide controls, there is greater risk of a breakdown in control activities which could result in unrecorded transactions, undetected errors, or misappropriation of funds. Recommendation: The Oklahoma State Auditor & Inspector’s office (OSAI) recommends the County design and implement policies and procedures to identify and address risks. These procedures should be written policies and procedures and could be included in the County’s Policies and Procedures Handbook. Management Response: Chairman of the Board of County Commissioners: The elected officials of Ottawa County will work to implement a policy that would establish controls mitigating the internal and external risks that the county faces. These controls will include each office writing and establishing a disaster recovery plan, and ensuring all key accounting duties, such as payroll, are properly segregated. Risks will be discussed throughout the year, and as other risks arise, the County will work to implement controls to mitigate those risks. The County will review auditor recommendations and will take every possible step to ensure the County is adequately addressing risk and monitoring. Criteria: Internal control is an integral component of an organization’s management that provides reasonable assurance that the objectives of effectiveness and efficiency of operations, reliability of financial reporting and compliance with laws and regulations are being met. Internal control comprises the plans, methods, and procedures used to meet missions, goals, and objectives. Internal control also serves as the first line of defense in safeguarding assets and preventing and detecting errors and fraud. County management is responsible for designing a county-wide internal control system comprised of control environment; risk assessment; information and communication; and monitoring for the achievement of these goals. Risk Assessment is a component of internal control which should provide for an assessment of the risks the County faces from both internal and external sources. Once risks have been identified, they should be analyzed for their possible effect. Management then has to formulate an approach for risk management and 18  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 decide upon the internal control activities required to mitigate those risks and achieve the internal control objectives. Monitoring is a component of internal control which should assess the quality of performance over time and ensure that the findings of audits and other reviews are promptly resolved. Ongoing monitoring occurs during normal operations and includes regular management and supervisory activities, comparisons, reconciliations, and other actions people take in performing their duties. It includes ensuring that management know their responsibilities for internal control and the need to make control monitoring part of their regular operating process. Finding 2015-2- Inadequate Internal Controls Over the Payroll Process (Repeat Finding) Condition: Upon inquiry and observation of the County’s payroll process, we noted the following weaknesses: • Lack of segregation of duties over the payroll process – One person enrolls all new employees, removes terminated employees, updates employees’ master files, maintains personnel files, prepares payroll, prints payroll warrants, and is the bank contact for direct deposit errors. Cause of Condition Policies and procedures have not been designed and implemented with regard to segregation of duties and/or compensating internal controls over the payroll process. Effect of Condition: This condition could result in unrecorded transactions, misstated financial reports, undetected errors, or misappropriation of funds. 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: I was not in office during the period under audit. However, we have segregated the duties within payroll since I was elected. We now have one employee that is in charge of enrollment, another employee that updates employees’ files, and still another employee that prepares and prints payroll warrants. Sometimes, preparing and printing warrants is done by two different employees as well. Criteria: Accountability and stewardship are overall goals of management in the accounting of funds. Internal controls should be designed to analyze and check accuracy, completeness, and authorization of payroll calculations and/or transactions. To help ensure a proper accounting of funds, the duties of processing, authorizing, and payroll distribution should be segregated. 19  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Finding 2013-3 - Inadequate Segregation of Duties Over the Collection Process Process in the County Treasurer’s Office (Repeat Finding) Condition: Upon inquiry and observation of the County’s collection process, we noted that one person can take in collections, issue receipts, perform drawer close out and reconciliation, and prepare deposit with little or no review. Cause of Condition: Policies and procedures have not been designed and implemented with regard to segregation of duties and/or compensating internal controls over the collection process. Effect of Condition: This condition could result in unrecorded transactions, misstated financial reports, undetected errors, or misappropriation of funds. 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 Treasurer: After closing out each day, each cashier’s report is passed to another cashier and checked for accuracy. Starting in fiscal year 2017, whoever is doing the final closeout and making the deposit for the bank, their drawer and report is checked by another cashier. Criteria: Accountability and stewardship are overall goals of management in the accounting of funds. An important 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 transactions, and safeguarding assets from misappropriation. To help ensure a proper accounting of funds, the duties of receiving, receipting, recording, depositing cash and checks, and reconciliations should be segregated. Finding 2015-4 - Inadequate Internal Controls Over 911 Fee Collections (Repeat Finding) Condition: On November 25, 1991, the Ottawa County E-911 Governing Authority (the Authority) was created to provide for the collection of, monitoring and safeguarding of public funds collected to pay for the installation and maintenance of the E-911 equipment and the installation and maintenance of the line and equipment for Enhanced 911 service for Ottawa County. Furthermore, Title 63 O.S. § 2843.2L states “within thirty (30) days of receipt, the Oklahoma Tax Commission shall pay all remitted prepaid wireless nine-one-one fees to the governing bodies that the Statewide Nine-One-One Advisory Board has certified as eligible to receive funds. Such certification shall be provided to the Oklahoma Tax Commission annually before July 1. Eligible governing bodies shall be those governing bodies that have imposed, and are 20  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 collecting, the nine-one-one emergency wireless telephone fee as authorized in subsection A of Section 2843.1 of Title 63 of the Oklahoma Statutes.” In fiscal year 2015, the Ottawa County Board of County Commissioners was the certified eligible governing body to receive the E-911 funds. The Oklahoma Tax Commission (OTC) remitted $31,687.70 to the Ottawa County Treasurer; however, the County Treasurer did not receive these funds as OTC had been notified to remit the funds to “the Authority’s” bank account named “Ottawa County Treasurer, E-911 Trust, ATTN: Reba Sill” (trust account). OSAI obtained the trust account bank statements from the Authority and confirmed $31,687.70 was deposited in to the trust account. Cause of Condition: Policies and procedures have not been designed and implemented to ensure County funds are remitted to the County and deposited in a bank account under the direct supervision of the County Treasurer. Effect of Condition: County funds were remitted to and deposited in the Authority’s bank without knowledge of the Board of County Commissioners or the County Treasurer. Recommendation: OSAI recommends the County establish policies and procedures to ensure all County funds are remitted to and deposited by the County. OSAI also recommends the County provide OTC with the correct bank account information so that E-911 monies will be remitted directly to the County and not the Authority. Management Response: Chairman of the Board of County Commissioners: A contract will be created between Ottawa County and the E-911 Authority for fiscal year 2017-2018 that will allow deposits to channel through the Ottawa County Treasurer’s office. The Ottawa County Clerk's office will then appropriate the funds, create a purchase order and then issue a warrant for the funds that were deposited during that month. Criteria: Accountability and stewardship are overall goals of management in the accounting of funds. Internal controls should be designed to analyze and check accuracy, completeness, and authorization of transactions. Title 63 O.S. § 2843.2L states “within thirty (30) days of receipt, the Oklahoma Tax Commission shall pay all remitted prepaid wireless nine-one-one fees to the governing bodies that the Statewide Nine-One-One Advisory Board has certified as eligible to receive funds. Such certification shall be provided to the Oklahoma Tax Commission annually before July 1. Eligible governing bodies shall be those governing bodies that have imposed, and are collecting, the nine-one-one emergency wireless telephone fee as authorized in subsection A of Section 2843.1 of Title 63 of the Oklahoma Statutes.” 21  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Finding 2015-5 - Violation of Oklahoma Open Records Act (Repeat Finding) Condition: The payroll claims and payroll affidavits for one hundred and twenty-three (123) of the payroll expenditures could not be located in the County Clerk’s files as follows: • Twenty-eight (28) for fiscal year 2013, • Forty (40) for fiscal year 2014, and • Fifty-five (55) for fiscal year 2015. Upon engaging with Ottawa County, management signed the engagement letter which stated “Management is … responsible for making all financial records and related information available to us and for ensuring that management is reliable and financial information is reliable and properly recorded.” All County officials were considered management; however, the County Clerk’s (Clerk) first deputy signed the letter in lieu of the Clerk as the Clerk did not attend the engagement meeting. OSAI also learned that during fiscal year 2015 and 2016, the Clerk primarily worked from home and would not be seeking re-election. Around June 13th, 2016, OSAI requested a sample of fiscal year 2013, 2014, and 2015 expenditures to examine. Of the two hundred and one (201) expenditures selected to test, one hundred and twenty-four (124) were payroll expenditures. When OSAI attempted to obtain the support documentation for the payroll expenditures, the payroll claims and payroll affidavits for one hundred and twenty-three (123) of the payroll expenditures could not be located in the County Clerk’s files. When the Clerk’s deputies were unable to locate the documentation, the first deputy stated she would ask the Clerk (who was working from home) if she knew where the documentation was. OSAI was not notified whether or not the Clerk knew where the documentation was. On June 30th, 2016, the day after the County primary elections, an OSAI auditor encountered the Clerk returning documents to the courthouse. Upon inquiry, the auditor learned that the Clerk was returning county documents from her home, including the payroll claims and affidavits that were missing. The Clerk stated that she had taken this documentation home because she wanted to make them look “nice and neat” for the auditors. Cause of Condition: Policies and procedures have not been designed and implemented to ensure all County records are adequately safeguarded and are readily available within the Ottawa county courthouse. Effect of Condition: This condition resulted in County records not being readily available for auditing purposes and the County Clerk possibly violating the Oklahoma Open Records Act. Recommendation: OSAI recommends management implement policies and procedures designed to keep and maintain complete records of all receipts and expenditures of any public funds, to include purchase orders, payroll claims and affidavits, and any and all additional support documentation. OSAI further recommends that in the event County records must be removed from County premises, management establish policies and procedures to document what documentation is being removed, the reason and date of the removal, and who is in custody of the documentation. 22  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Management Response: Chairman of the Board of County Commissioners: Ottawa County will implement policies and procedures to maintain and keep complete records of receipts and expenditures of all public funds to include all supporting documentation on file at the proper office directed to maintain this information at all times. No original documents will be allowed to leave said office unless requested by our legal counsel such as the district attorney. Written requests, as per legal counsel will be the only exception and then only a copy of said document will be released. County Clerk: I was not County Clerk at this time as I did not take office until after the June 30, 2016 election, and was not familiar with the procedures. Criteria: Title 19 O.S. § 245.A states in part, “It shall be the duty of the county clerk to designate upon every account, which shall be audited and allowed by the board, the amount so allowed, and the clerk shall deliver to any person a copy certified or otherwise of any record in the clerk’s office and any account on file thereon…” Title 51 O.S. § 24A.4 states, “In addition to other records which are kept or maintained, every public body and public official has a specific duty to keep and maintain complete records of the receipt and expenditure of any public funds reflecting all financial and business transactions relating thereto, except that such records may be disposed of as provided by law.” Title 51 O.S. § 24A.5 states in part, “All records of public bodies and public officials shall be open to any person for inspection, copying, or mechanical reproduction during regular business hours” [exceptions follow]… Furthermore, part 5 of Title 51 O.S. § 24A.5 states “a public body must provide prompt, reasonable access to its records but may establish reasonable procedures which protect the integrity and organization of its records and to prevent excessive disruptions of its essential functions. Any public body which makes the requested records available on the Internet shall meet the obligation of providing prompt, reasonable access to its records as required by this paragraph.” Finding 2015-6 - Conflict of Interest – Holding of Dual Offices (Repeat Finding) Condition: The County Clerk was hired by the E-911 Trust Authority to serve as the Authority’s Clerical Administrator. Her duties for the Authority consist of preparing payroll, agendas, deposit, bank reconciliations, and any and all correspondence; maintaining accounts payable and files for history and audit purposes; assisting with the budget process; and taking minutes of meetings. In fiscal year 2015, the County Clerk received net pay in the amount of $12,652.44 for these services. 23  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Cause of Condition: Policies and procedures have not been designed and implemented to ensure no one person holds offices within both the County and any of the County’s political subdivisions. Effect of Condition: It appears the County Clerk may have violated Title 51 O.S. § 6. Recommendation: OSAI recommends policies and procedures be established to ensure elected officials and their deputies do not hold other positions within the County or its political subdivisions that would be in violation of Title 51 O.S. § 6. Management Response: Chairman of the Board of County Commissioners: This issue will be placed on our agenda for discussion related to amending our policies and procedures to address the conflict of interest of dual office holding to ensure that no elected officials and their deputies are not eligible to hold other positions within the county or its political subdivisions that would be in violation of Title 51 O.S. § 6. Criteria: Title 51 O.S. § 6 prohibits any person “holding an office under the laws of the state” and any “deputy of any officer so holding any office” from “hold[ing] any other office[,] or be[ing] the deputy of any officer holding any office, under the laws of the state” “during the person’s term of office”. SECTION 2—This section contains certain matters not required to be reported in accordance with Government Auditing Standards. However, we believe these matters are significant enough to bring to management’s attention. We recommend that management consider these matters and take appropriate corrective action. Finding 2015-8 - Inadequate Internal Controls and Noncompliance Over Inmate Trust Fund Checking Account and Sheriff Commissary Fund Condition: Upon inquiry and observation of the Inmate Trust Fund Checking Account and Sheriff Commissary Fund, the following exceptions were noted: • The key to the safe, in which inmates’ money is held until deposited at the bank, is maintained on the office manager’s desk and easily accessed by all. • Collections are not deposited into the Inmate Trust Fund Checking Account on a daily basis. • The Sheriff’s office does not file an Annual Report for the Commissary Fund with the Board of County Commissioners by January 15th, of each year Cause of Condition: Policies and procedures have not been designed and implemented regarding the Inmate Trust Fund Checking Account and Sheriff Commissary Fund. 24  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Effect of Condition: These conditions resulted in noncompliance with state statutes. Also, without proper accounting and safeguarding of the Inmate Trust Fund Checking Account, there is an increased risk of misappropriation of funds. Recommendation: OSAI recommends the following: • All collections should be maintained in a secure location with limited access. • Daily collections should be deposited to the Inmate Trust Fund Checking Account on a daily basis. • The Sheriff should file a report of the commissary with the Board of County Commissioners by January 15th, of each year. Management Response: County Sheriff: I was not Sheriff during this time. Immediate appropriate action will be taken to properly secure the inmate’s money in the safe and to start making daily deposits of these collections. The sheriff's office will also submit commissary reports by the designated date. Criteria: Accountability and stewardship are overall goals of management in accounting of funds. To help ensure a proper accounting of funds, collections should be maintained in a secure environment and deposited at the bank on a daily basis. In addition, bank reconciliations should be performed accurately each month and all reconciling items be identified and confirmed. Title 19 O.S. § 180.43D requires that an annual report of the Sheriff’s Commissary be submitted to the Board of County Commissioners by January 15th of the subsequent year. Finding 2015-9 - Inadequate Internal Controls and Noncompliance Over Fixed Assets Inventory Condition: Upon inquiry and observation of fixed assets inventory, we noted the following: District 1: • Although an annual count of is performed by District 1, a fixed assets inventory list is not filed with the County Clerk. • Inventory records did not include a dump truck with asset number 302.01.21. District 2: • Although an annual count of is performed by District 2, a fixed assets inventory list is not filed with the County Clerk. District 3: • An annual fixed asset count is not being performed, a fixed assets inventory list is not filed with the County Clerk. • A fixed asset inventory list is not filed with the County Clerk. • Inventory records did not include a service truck with VIN 1HTSCN883. • A 1996 Chevy Pickup with inventory number 321-03.03 could not be located. 25  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Cause of Condition: Policies and procedures have not been designed and implemented to ensure compliance with state statute regarding the identification and accounting of fixed assets. Effect of Condition: These conditions resulted in noncompliance with state statutes. Opportunities for loss and misappropriation of county assets may be more likely to occur when the County does not have procedures in place to account for fixed assets. Recommendation: OSAI recommends the County perform and document a periodic inventory of fixed assets in accordance with 19 O.S. § 178.1. Further, OSAI recommends the County adopt policies and procedures to implement a system of internal controls over fixed assets. These controls would include: • Perform an annual inventory count. • Retain documentation to verify the physical inventory counts were performed. • Inventory count should be performed by someone other than the receiving officer or inventory officer. • Up to date inventory records should be filed with the County Clerk. Management Response: County Commissioner District 1: Ottawa County District #1 received a dispatch from Ottawa County Clerk's office issued by the Ottawa County Purchasing Agent, dated February 12, 2007 related to inventory records according to the Oklahoma State Statutes stating that it is the duty of the county clerk to maintain the master inventory record for all county owned equipment or land in our district. In addition, each county office or department must maintain a subsidiary set of inventory records to be reviewed annually to make certain that they match the master inventory record. A note was attached to this file, related to a phone conversation from the County Clerk and the former District 1 Administrative Assistant dated December 9, 2008, that stated that the County Clerk informed the District 1 Administrative Assistant that one of the purchasing schools informed them that the clerk's office was no longer enforced to house these records. As per our meeting on April 5, 2017, I have directed Ottawa County District #1 Road Foreman to complete a master log of all fixed assets and then submit the list to my current District 1 Administrative Assistant and also to the Ottawa County Clerk's office on an annual basis. Related to missing assets to inventory master list will be addressed will be taken care of when Road Foreman for Ottawa County District #1 completes his inventory which is underway beginning April 6, 2017. County Commissioner District 2: I took office on January 3, 2017 and I inherited the situation. However, I have taken steps to improve inventory record keeping. County Commissioner District 3: Annual fixed asset count will be performed on an annual event. I will work with the County Clerk to ensure we are compliant and provide documentation. A fixed asset inventory list will be compared with District 3 to ensure County Clerk has all updated information. District 3 will ensure all County equipment is accounted for and all information will be provided to the County Clerk. 26  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 County equipment that is no longer owned by District 3 will be removed from inventory list with disposition status and supplied to the County Clerk. Criteria: Accountability and stewardship are overall goals of management in the accounting of funds. An important 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 transactions and safeguarding assets from misappropriation. Effective internal controls include designing and implementing procedures to ensure that all supplies, materials, and equipment received, disbursed, stored and consumed by their department comply with: Title 19 O.S. § 178.1 requires the board of county commissioners in each county of this state to take or cause to be taken, an inventory of all working tools, apparatus, machinery and equipment. Title 19 O.S. § 178.2 requires each elected county official to create and maintain inventory records and file those records with the County Clerk. Title 19 O.S. § 178.3A requires the County Clerk to be the custodian and repository of all inventory records, files and reports. Title 19 O.S. § 1504 requires the receiving officer to maintain a record of all items received, disbursed, stored and consumed by the department. Title 69 O.S. § 645 requires all county owned, rented, or leased road machinery or equipment be clearly and visibly marked “Property Of”. Finding 2015-10 - Inadequate Internal Controls and Noncompliance Over Consumable Inventories (Repeat Finding) Condition: Upon inquiry and observation of consumable inventories for Districts 1, 2, and 3, we noted the following: District 1: • Unleaded and diesel fuel held in the stationary fuel tanks is not accurately measured. The gauges on the tanks do not give accurate readings and the tanks were not monitored to obtain a fuel measurement. • Variances between consumable record balances and actual amounts on hand are indicated as follows: Inventory Item Consumable Records Physical Count Variance 40w20 Oil 222 Gallons 155 Gallons (67) gallons Grader Blades 88 Blades 85 Blades (3) Blades 27  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 District 2: • Satellite tanks are not locked and fuel usage is not tracked. • Fuel usage is not tracked for portable tanks. • Variances between consumable record balances and actual amounts on hand are indicated as follows: Inventory Item Consumable Records Physical Count Variance Grader Blades 102 Blades 90 Blades (12) Blades District 3: • There were no records indicating when the last consumable inventory was performed. • Consumable records did not have running balances. • Transfer documents were not used. • Satellite tanks are not locked and fuel usage is not tracked. • Fuel usage is not tracked for portable tanks. Cause of Condition: Policies and procedures have not been designed and implemented by county officers for the accurate reporting of consumable inventory items. Effect of Condition: These conditions resulted in noncompliance with state statutes. Opportunities for loss and misappropriation of county assets may be more likely to occur when the County does not have procedures in place to account for consumable inventories. Recommendation: OSAI recommends the County adopt policies and procedures and design and implement a system of internal controls over consumable inventories. These controls would include: • Performing and documenting a periodic physical count of inventory. • Maintaining accurate consumable records that indicate running balances for all consumable items. • Preparing and maintaining transfer documents for all consumable items. • Separating the key functions of receiving, maintaining, and verifying consumable inventories. • Maintaining a fuel log with all pertinent information including a current balance for all stationary, satellite, and portable fuel tanks. • Properly securing fuel maintained in satellite tanks. • Reconciling fuel log periodically to actual fuel on hand and explain any variance or adjustments. Management Response: County Commissioner District 1: Unleaded, diesel and oils are logged on a daily activity log that each employee is required to maintain at the end of each work day, as well as what equipment each employee uses on a given day. A weekly log is maintained for each unit of equipment to track each consumable item that has been added to each unit. These reports are transferred on a weekly basis. Unleaded and diesel tanks are checked by a measuring stick with the proper measurement marks that correspond with the dimensions of each tank every workday and then deducted from the total from the previous day’s measurements to come up with the current balance of 28  OTTAWA COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND RESPONSES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 each tank. These balances are computed each Thursday which is the end of our normal work week. Our grader blades are inventoried on a monthly interval. They are also tracked on the daily activity log and then the two are compared at the end of the month. Auditor Response: During our testwork, it was noted that District 1 did not have a stick to measurer fuel tanks and that the gauges on the fuel tanks did not give an accurate reading of the gallons held in the tanks. County Commissioner District 2: I took office on January 3, 2017 and I inherited the situation. However, I have taken steps to improve inventory recordkeeping. We have placed locks on all satellite fuel tanks and metering devices on all pumps. Additionally, records on the fuel purchased and used on each tank is being maintained. County Commissioner District 3: • Records will be maintained to show consumable inventory is performed. • All consumables will be maintained to ensure balances are kept. • Transfer documents will be used and maintained. • Satellite tanks will be secured with lock and fuel usage will be documented. • Portable tanks will not be used by District 3; all fuel usage will be used by main tanks. Criteria: Accountability and stewardship are overall goals of management in the accounting of funds. An important 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 transactions and safeguarding assets from misappropriation. Title 19 O.S. § 1504A requires the receiving officer to maintain records of all items received, disbursed, stored and consumed by the department. 29 OFFICE OF THE STATE AUDITOR & INSPECTOR 2300 N. LINCOLN BOULEVARD, ROOM 100 OKLAHOMA CITY, OK 73105-4896 WWW.SAI.OK.GOV