--- OCR page 1 of 32 --- : . OTTAWA COUNTY, OKLAHOMA FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED JUNE 30, 2002 eS This publication is printed and issued by the State Auditor and Inspector as authorized by 19 0.8. § 171. Pursuant to 74 O.S. § 3105, 35 copies have been prepared and distributed at a cost of $72.45. Copies have been deposited with the Publications Clearinghouse of the Oklahoma Department of Libraries. --- OCR page 2 of 32 --- jin y See, \ y as 1 : | See a %G i) ey ae STATE OF OKLAHOMA OFI JEFF A. MeMAHAN FICE OF THE AUDITOR AND INSPECTOR State Auditor and Inspector June 13, 2003 TO THE CITIZENS OF OTTAWA COUNTY, OKLAHOMA Transmitted herewith is the audit of Ottawa County, Oktahoma, for the fiscal year ended June 30, 2002. A report of this type is critical in nature; however, we do not intend to imply that our audit failed to disclose commendable features in the present accounting and operating procedures of the County. We wish to take this opportunity to express our appreciation for the assistance and cooperation extended to our office during the course of our audit. The Office of the State Auditor and Inspector is committed to serve the public interest by providing independent oversight and to issue reports that serve as a management tool to the state to ensure a government which is accountable to the people of the State of Oklahoma. Sincerely, AE Ait JEFF A. McMAHAN State Auditor and Inspector 2300 North Lincoin Boulevard - Room 100 State Capitol - Oklahoma City, OK 73405-4801 + (405) 521-3495 - Fax (405) 521-3426 - www.sai.siata.ok us --- OCR page 3 of 32 --- ‘ : OTTAWA COUNTY, OKLAHOMA FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2002 a ee TABLE OF CONTENTS INTRODUCTORY SECTION (Unaudited) Report to the Citizens of Ottawa County 0.2... eee ect cte cecceecceeccennennnerssarateseeensameesenneeeenenersanerceeseeeed County Officials and Responsibilities .......ssssesssccssessssessseseesseeesssnsseuesesessssssmieatssseneiesssassseeceeee oomreeecerssae Hl Add Valorem Tax Distribution... cesessessentsecnsessseeeseeesaeesiecesnecseecseecseccrmetierssueseresneetsenencseatsaneesees WIT FINANCIAL SECTION Report of State Auditor and Inspector......ssescssssssecsssscsscosescccaececcoveessonereeeniietssnaseresieessmersamcnsseassseaccanareee ce General-Purpose Financial Statements: Combined Balance Sheet - All Fund Types and Account Group ..........-:-sscsosessescreneseenscnneinenieeesennesenaee 3D Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - All Governmental Fund Types .......0...-.csesssssssssserscssssecevnuecsseescnnseennitsetsnnseenenseneeee Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General and Special Revenue (County Health Department only) Funds ....-sc-sscssssecsssseesssnssesesersinssesneeerreeeemaned Notes to the Financial Statements .........:-sessessessssessenssanssansssnnsasaviasessusseesseeesissesseesstesseessstessooneeasee annie COMPLIANCE/INTERNAL CONTROL SECTION Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards ....ccs.cssssrsessssessieesinsssaeetssitscieecsnniseenetsssnesenees LG i --- OCR page 4 of 32 --- REPORT TO THE CITIZENS OF OTTAWA COUNTY, OKLAHOMA Ee The extreme northeastern county of Oklahoma, bordering Kansas and Missouri, is named for the Ottawa Indians. 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 agriculture income is from livestock and dairy products. Northeastem Oklahoma A & M College is located at Miami, the county seat. Various industries are represented throughout Ottawa County. County Seat — Miami Area — 471.4 Square Miles County Population — 30,881 (1999 est.) Farms - 972 Land in Farms - 214,870 Acres Source: Oklahoma Almanac 2001-2002 See independent auditor's report. fi --- OCR page 5 of 32 --- COUNTY OFFICIALS AND RESPONSIBILITIES COUNTY ASSESSOR Linda Kelly @) Quapaw The County Assessor has the responsibility to appraise and assess the real and personal property within the county for the purpose of ad valorem taxation. Also, the County Assessor is required to compute the ad valorem taxes due on all taxable property. The County Assessor appraises all the taxable real and personal property according to its fair cash value for which the property is actually being used as of January 1 of the taxable year at the percentages provided for in Article 10, § 8 of the Oklahoma Constitution. The County Assessor is required to build and maintain permanent records of the taxable real property and tax exempt real property within the county. Information entered on each record includes the property's legal description, owner's name and address, and the homestead exemption status of the owner. COUNTY CLERK Reba G. Sill (D) Miami The County Clerk serves as the register of deeds and custodian of records for the county. The County Clerk also serves as the secretary to several boards, including the Board of County Commissioners, the County Excise Board, the County Board of Equalization, and the Board of Tax Roll Corrections. The County Clerk reviews all the claims for payment of goods and services purchased or contracted by the county, and prepares the proper warrants for payment of those goods and services and the county payroll. The County Clerk, or his or her designated deputy, serves as the purchasing agent for the county. This system is a means to ensure the public that tax dollars are being spent appropriately. Various records within the different county offices are classified as “open records.” As such, they can be reviewed and mechanically copied by the public. See independent auditor's report. iti --- OCR page 6 of 32 --- COUNTY OFFICIALS AND RESPONSIBILITIES rr BOARD OF COUNTY COMMISSIONERS DISTRICT #1 DISTRICT #2 Joe Crawford James E. Leake (D) Commerce (D) Miami DISTRICT #3 Russell Earls @) Fairland The Board of County Commissioners is the chief administrative body for the county. County Commissioners are also responsible for maintaining and constructing the county roads and bridges. The Commissioners must act as a Board when entering into contracts or other agreements affecting the county's welfare. Thus, actions taken by the Board are voted on and approved by a majority of the Commissioners. The Board of County Commissioners' business meetings are open to the public. As the county's chief administrative body, the three County Commissioners must make major financial decisions and transactions. The Board has the official duty to ensure the fiscal responsibility of the other county officers who handle county funds. The review and approval procedures empowered to the Board of County Commissioners are a means to provide the public with a fiscally efficient system of county government, See independent auditor's report. iv --- OCR page 7 of 32 --- COUNTY OFFICIALS AND RESPONSIBILITIES HN ee COUNTY SHERIFF Dennis King (@) Miami The County Sheriff is responsible for preserving the peace and protecting life and property within the county's jurisdiction. As the county's chief law enforcement officer, the sheriff has the power and authority to suppress all unlawful disturbances, to apprehend and secure persons charged with felony or breach of peace, and to operate the county jail. The County Sheriff has the responsibility of serving warrants and processing papers ordered by the District Court. COUNTY TREASURER Brenda Conner (D) Commerce All revenues received by county government from ad valorem taxes and other sources are deposited with the County Treasurer. The County Treasurer collects ad valorem taxes for the county and its political subdivisions. The County Treasurer is authorized to issue delinquent personal property tax warrants and to impose tax liens on real property for delinquent taxes. To account for county revenues and expenditures, the County Treasurer is required to maintain an accurate record of all the monies received and disbursed. The State Auditor and Inspector's Office prescribes all the forms used by the County Treasurer, and at least twice a year inspects the County Treasurer's accounts. See independent auditor's report. y --- OCR page 8 of 32 --- COUNTY OFFICIALS AND RESPONSIBILITIES Ce eT. COURT CLERK Beverly Stepp (D) Pitcher The Court Clerk has the primary responsibility to record, file, and maintain as permanent records the proceedings of the District Court. Court proceedings are recorded in the appropriate journal or record docket. All the court proceedings are public information except those related to juvenile, guardianship, adoption, and mental health cases. The Court Clerk issues marriage licenses, passports, notary certificates, beer and pool hall licenses, and private process server licenses. Monies from the court fund are identified for distribution by the Court Clerk to the appropriate units of county and state government. Court Clerks usc forms and follow procedures prescribed by the Court Administrator's Office, the Oklahoma Supreme Court, and the State Auditor and Inspector. DISTRICT ATTORNEY ‘Thomas H. May (D) Afton As the chief attorney for county government, the District Attorney acts as the legal advisor to the county officers on matters related to their duties. The District Attomey represents the county in civil litigation. County officials may call upon the District Attomey to clarify a law or request an official interpretation from the Attorney General. Sce independent auditor's report. vi --- OCR page 9 of 32 --- COUNTY OFFICIALS AND RESPONSIBILITIES EE ELECTION BOARD SECRETARY Dave EB. Charloe (D) Miami he Election Board Secretary is appointed by the State Election Board and is the chief administrative officer of the County Election Board. The County Election Board has direct responsibility for all the Dallots used in all elections within the county. The Board also conducts all elections held within the county. To finance the operating expenses of the County Election Board, the County Excise Board must appropriate sufficient funds annually. The state and counties split the election costs, but counties must pay for any county elections not held concurrently with state elections. See independent auditor's report. vii --- OCR page 10 of 32 --- AD VALOREM TAX DISTRIBUTION OTTAWA COUNTY, OKLAHOMA SHARE OF THE AVERAGE MILLAGE Property taxes are calculated by applying a millage rate to the asscssed 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 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. Co. General Se patane Co. Health Ey | 94.20% Co. Health ee eee) HICo. General 2.06% a County-Wide Millages: School District Millages: Gen, Bldg, = Ske, = VorTech 9 Common Total Co. General Fund 10.00 Wyandotte [-1 35.00 5.00 13.09 10.00 4.00 67.09 Co. Health 4.50 Turkey Ford D-10 35.00 5.00 10.28 10.00 4.00 64.28 Co. Sinking 0.34 Quapaw 1-14 35.00 5.00 10.00 4.00 54.00 Picher E15 35.00 5.00 10.87 10.00 4.00 64.87 Other Commerce I-18 35.00 5.00 3.92 10.00 4.0 57.92 S.D. 123 EMS. 3.00 Miami +23 35.00 5.00 643 10.00 4.00 60.43 Afton 1-26 35.00 5.00 10.00 4.00 54.00 Fairland 1-31 35,00 5.00 13.61 10.00 400 67.61 Neosho Valley 35.00 5.00 10.54 10.00 4.00 64,54 Miami 1-18 35.00 5.00 3.92 10.00 4.00 5792 See independent auditor's report. Vil --- OCR page 11 of 32 --- Independent Auditor’s Report --- OCR page 12 of 32 --- EEN Sor Xe J STATE OF OKLAHOMA ol JEFF A. MeMAHAN FFICE OF THE AUDITOR AND INSPECTOR, State Auditor and Inspector Independent Auditor’s Report TO THE OFFICERS OF OTTAWA COUNTY, OKLAHOMA We have audited the accompanying general-purpose financial statements of Ottawa County, Oklahoma, as of and for the year ended June 30, 2002, as listed in the table of contents. These general-purpose financial statements are the responsibility of Ottawa County’s management. Our responsibility is to express an opinion on these general-purpose financial statements 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, jssued 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 statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 explained in Note 1(H), the general-purpose financial statements referred to above do not include the general fixed asseis account group, which should be included in order to conform with accounting principles generally accepted in the United States of America. The amount that should be recorded in the general fixed assets account group is not known. In our opinion, except for the effect on the general-purpose financial statements of the omission described in the preceding paragraph, the general-purpose financial statements referred to above present fairly, in all material respects, the financial position of Ottawa County, Oklahoma, as of June 30, 2002, and the results of its opcrations for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated March 25, 2003, 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 and contracts. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. 2300 North Lincoln Boulevard « Room 100 State Capitol « Oktahorna City, OK 73105-4801 = (405) 621-2495 - Fax (405) 621-3426 « www.sai stata obs: --- OCR page 13 of 32 --- Our audit was performed for the purpose of forming an opinion on the general-purpose fiancial statements of Ottawa County, Oklahoma, taken as a whole. The other information listed in the table of contents under Introductory Section has not been audited by us, and accordingly, we express no opinion on such data, Sincerely, JEFF A. MCMAHAN State Auditor and Inspector March 25, 2003 2 --- OCR page 14 of 32 --- General-Purpose Financial Statements --- OCR page 15 of 32 --- OTTAWA COUNTY, OKLAHOMA COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUP JUNE 30, 20082 Nee Fiduciary Account Governmental Fund Types. Fund Types Group ‘Trust General Total Spocial Debt Capital and Long-Term (Memorandum General Revenue Service __Projects__ _Agency Debt Only) ASSETS Cash $ 711,959 S 3,257,086 $ 37,968 S 120351 $ 752201 $4,879,565 ‘Ad valorem taxes receivable 17,872 2,681 ol 114,144 135,298 Sales tax receivable 79,307 79,307 14,173 172,787 Accrued interest receivable 4,903 21,324 26,227 ‘Due from other governments 5,700 176,983 17,448 200,131 ‘Amount availble in debt service fund 38,569 38,569 ‘Amount to be provided for retirement of general long-term debt 206,001 206,001 Amount to be provided for capitalized lease agreements: 1,054,586 1,054,586 ‘Total assets $319,741 $_ 3,537,383) S 38569 $ 120351 $ 897966 $ 1,299,156 S$ 6,713,164 LIABILITIES AND FUND BALANCES: Liabilities: Warrants payable $ 96,033 S$ 196956 $ $ s 5 S$ 292,989 Accounts payable 11,526 128,385 139,91 Due to other taxing units 216,560 216,560 Due to ators 681,406 681,406 General obligation bonds payable 235,000 235,000 Judgments payable 9,570 9,570 ‘Capitalized lease obligations payable 1,054,586 1,054,586 ‘Total abilities 107,559. 325,341 = - 897,966 1,299,156 2,630,022 Fund balances: Reserved! for encumbrances 123351 10.433 193,784 Reserved for debt service 38,569 38,569 Unreserved: Designated for capital projects 120,351 120,351 ‘Undesignated 588,831 3,141,607 3,730,438 “Totel fund balances 712,182 3,212,040 38,509 120551 = 5 4,083,142 Total liabilities and fund balances $_ 819,741 S$ 3,537,381 $ 38569 S 120,351 $ 897,966 S$ 1,299,156 S$ 6,713,164 The notes to the financial statements are an integral part of this statement. 3 --- OCR page 16 of 32 --- OTTAWA COUNTY, OKLAHOMA COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUND TYPES FOR THE YEAR ENDED JUNE 30, 2002 a Govemmental Fund Types Toul Special Debt Copital = (Memorandum General Revenue Service Projects Only) Revenues: Ad valorem taxes S 995905 S 24239 S 3037 S 3637 S$ 1,164,157 Sales tox 905,016 905,566 1,810,582 Changes for services 312,445 325,344 637,789 Intergovermmental revenues 249,062 2,459,707 2,708,769 ‘Miscellaneous revenues 57,903 528,404 462. 586,769 Total revenues 2,420,331 4,453,260 30,838 3.07 6,508,066 ‘Expenditures: ‘Current operating: General goverment 1,262,201 117,428 1,379,629 Publie safety 339,776 664,665 1,504,441 Culture and recreation 88H 3811 ‘Education, 39,709 39,709 ‘Health and welfare 398,209 398,209 Roads and highways 128,956 3,609,328 3,738,284 Capital outlay 428,631 428,631 Debi service: Principal retirement 24,578 24571 Interest and fiscal agent charges 16,247 16247 Total expenditures 2279453 5.218.261 40818 = 7538,532 Excess of revenues over (under) expenditures 140,878 (165,001) (9,980) 3,637 (630466) Other financing sources (uses): Capitalized lease agreements 428,631 428,631 ‘Total other financing sources (uses) = 428,631 : : 428,631 Excess of revenues and other sources over (undex) expenditures and other uses 140.578 (336,370) (9,980) 3,637 (201,835) Beginning fund balances 571,304 3,548,410 48,549 116,714 4284977 Ending find balances 3712182 S_ 3,212,040 _S 38,569 S$ 120,351 5 4,083,142 The notes to the financial statements are an integral part of this statement. 4 --- OCR page 17 of 32 --- OTTAWA COUNTY, OKLAHOMA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL - GENERAL AND SPECIAL REVENUE (COUNTY HEALTH DEPARTMENT ONLY) FUNDS FOR THE YEAR ENDED JUNE 30, 2002 General ‘Special Revenue Funds ‘County Health Department Budget Actual Variance Budget Achial Variance ‘Beginning find balances, budgetary basis S 462834 S$ 465,356 & 2522 S$ 105402 $ 107,185 S 1733 Revenues: Ad valorem taxes 816,818 894,689 77871 122,523 134242 1,719 Sales tax 761,410 904,275 142,865 ‘Charges for services 263,298 312,446 49,148 Intergovernmental revernics 200,732 249,546 48,814 Miscellaneous revenues 68,845 59,272 (10573) 253,638 254,077 439 Total revenues, budgetary basis 2,112,103 2,420,228 308,125 376,161 388,319 12,158, Expendinures: ‘Caarent operating: ‘General government 1,544,395 1,386,365 158,030 Public safety 840,716 840,702 4 Health and welfare 1 1 481,563 407,541 74022 ‘Culture and recreation 9,000 8811 189 Education 39,960 39,709 251 Roads and highways 140,865. 128,948 1,917 ‘Total expenditures, budgetary basis 2,574,937. 240A 535. 170,402. 481,563. 407,541 AM Excess of revenues and beginning find balances over expenditures s : 481,049 £48104 = : 87,963 S$ 87,963 ‘Reconciliation to Statement of Revenues, Expenditures, and Changes in Fund Balances Add: Ad valorem toxes receivable 17,872 2,681 Sales tax receivable 79,307 Due from other governments 5,700 Interest receivable 4,903 Reserved for encumbrances 123,351 0,774 Ending fund balances S__712,182 §_ 151418 The notes to the financial statements are an integral part of this statement. 5 --- OCR page 18 of 32 --- Notes to the Financial Statements --- OCR page 19 of 32 --- OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 i 1, Sw of Significant Accounting Policies The financial statements of the County are required to be presented in conformity with accounting principles generally accepted in the United States of America as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant accounting policies and practices are described below. A. Financial Reporting Entity Counties were created by the Constitution of Oklahoma. One county officer is appointed; however, most county officers are locally elected by their constituents. All county powers are delegated by the state. In accordance with accounting principles generally accepted in the United States of America, the financial statements of the reporting entity are required to include those of Ottawa County (the primary government) and its legally separate component units. The County has no component units. Related Organization Excluded from the Reporting Entity The County’s officials are responsible for appointing the members of the board of another organization, but the County’s accountability for this organization does not extend beyond making the appointments. The following organization is not included in the financial statements. Ottawa County Industrial Authority B. Fund Accounting The government uses funds and account groups to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain goverment functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. An account group is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect net expendable available financial Tesources. Funds are classified into two major categories: governmental and fiduciary. Governmental Funds Governmental funds are used to account for all or most of a government's general activities, including the collection and disbursement of earmarked monies (special revenue funds), the acquisition or construction of general fixed assets (capital projects funds), and the servicing of general 6 --- OCR page 20 of 32 --- OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 re TT Summary of Significant Accounting Policies (continued) long-term debt (debt service funds). The general fund is used to account for the activities of the general government not accounted for in some other fund. Fiduciary Funds Fiduciary funds are used to account for assets held on behalf of outside parties, including other governments, or on behalf of other funds within the government. Agency funds are gencrally used to account for assets that the government holds on behalf of others as their agent. Account Groups General Fixed Assets Account Group (GFAAG) - Accounting principles generally accepted in the United States of America require that the fixed assets of a government be reported in a general fixed assets account group (GFAAG). This account group is not a fund. It does not have a balance sheet as such, nor does it report operations. Instead, the GFAAG serves as a list of the government's fixed asscts and is designed to ensure accountability. General Long-Term Debt Account Group (GLTDAG) - The general long-term debt account group (GLTDAG) is used to account for a government's unmatured long-term indebtedness that has not been identified as a specific find liability of a trust fund. In addition to general obligation debt instruments (e.g,, bonds, notes), the GLTDAG is also used to report revenue bonds that will be repaid from general government resources, special assessment debt when the government is “obligated in some manner,” special revenue bonds, and certain liabilities that are normally not expected to be liquidated with expendable available financial resources (e.g., capitalized lease-purchase obligations). C. Measurement Focus and Basis of Accounting The accounting and financial reporting treatment applied to a fund is determined by its measurement focus and basis of accounting. All governmental fund types are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities are generally included on the balance sheet. Operating statements of these fund types present increases (j.c., revenues and other financing sources) and decreases (ie., expenditures and other financing uses) in net current assets. The modified accrual basis of accounting is used by all governmental fund types and agency funds. ‘Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.ec., when they become both measurable and available), "Measurable" means the amount of the transaction can be quantified, and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The government considers property taxes as available if collected within 60 days after year-end. Expenditures are recorded when incurred and the related fund liability is expected to be paid from available spendable resources. Principal and interest on general long-term debt are recorded as fund expenditures when paid or when amounts for principal and interest have been accumulated in the debt service fund for payments to be made early in the following year. 7 --- OCR page 21 of 32 --- OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 Summary of Significant Accounting Policies (continued Those revenues susceptible to accrual are property taxes, sales tax, interest revenue, and other taxes collected and held by the Oklahoma Tax Commission at year-end on behalf of the government. Charges for services are not susceptible to accrual because generally they are not measurable until received in cash. D. Budgetary Policies and Procedures Under current Oklahoma Statutes, the general fund and the county health department fund are the only funds required to adopt a formal budget. The budget presented for the general and special revenue (county health department only) funds includes the originally approved budgeted appropriations for expenditures as adjusted for supplemental appropriations and approved transfers between budget categories. Appropriations for the highway funds and other cash funds are made on a monthly basis, according to the funds then available. 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 the general and special revenue funds. Any encumbrances outstanding at year-end are reported as reservations of fund balances since they do not constitute expenditures or liabilities. At the end of the year, unencumbered appropriations are lapsed. ‘The Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General and Special Revenue (County Health Department only) Funds presents 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 Revenues, Expenditures, and Changes in Fund Balances - All Governmental Fund Types because of adopting certain aspects of the modified accrual basis of accounting and the adjusting of encumbrances to their related budget year. E. Cash The County pools cash resources of its various funds to facilitate the management of cash. Cash applicable to a particular fund is readily jdentifiable. The balance in the pooled cash accounts is available to meet current operating requirements. F. Receivables All receivables are reported at their gross value. G. Interest Receivable Interest on deposits is recorded as revenue in the year the interest is eamed and is available to pay liabilities of the current period. 8 --- OCR page 22 of 32 --- OTTAWA COUNTY, OKLAHOMA. NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 rT Summary of Significant Accounting Policies (continued H. Fixed Assets The County presently maintains some individual records of personal property; however, the County does not keep similar records for land, buildings, and improvements. Because the County does not maintain detailed records of its land, buildings, and improvements, a statement of general fixed assets, required by accounting principles generally accepted in the United States of America, is not presented on the Combined Balance Sheet - All Fund Types and Account Group. I. Risk Management The County is exposed to various risks of loss as follows: Types of Loss Method Managed Risk of Loss Retained General Liability The County participates If claims exceed pool - Torts in a public entity risk assets, the County would - Errors and Omissions pool; Association of have to pay its share of - Law Enforcement County Commissioners of the pool deficit. Officers Liability Okdahoma-Seif-Insured. - Vehicle Group. (See ACCO-SIG.) Physical Plant The County participates Tf claims exceed pool - Theft ina public entity risk assets, the County would - Damage to Assets pool. (See ACCO-SIG.) have to pay its share of ~ Natural Disasters the pool deficit. Worker's Compensation © The County participates If claims exceed pool - Employees' Injuries in a public entity risk assets, the County would pool; Association of have to pay its share of County Commissioners of the pool deficit. Oklahoma-Self-Insured Fund. (See ACCO-SIF.) Health and Life The County carries None - Medical commercial insurance + Disability for these types of ~ Dental risk. - Life ACCO-SIG - The pool operates as a common risk management and insurance program and is to be self-sustaining through member premiums. Each participating county will pay a deductible amount ($1,000 to $10,000; Ottawa County has a $5,000 deductible) for each insured event as stated in the County’s “Certificate of Participation.” The risk pool will pay legitimate claims in excess of the deductible amounis up to and including $50,000 per insured event. The pool has acquired commercial 9 --- OCR page 23 of 32 --- OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENTS SUNE 30, 2002 Summary of Significant Accounting Policies (continued) reinsurance to cover claims in excess of $50,000 up to $1,000,000 limit per insured event. The pool, established in 1986, has never had to assess additional premiums to be paid by its members. ACCO-SIF - The poo! operates as a common risk management and insurance program and is to be self-sustaining through member premiums. ACCO-SIF was set up in 1984 and will pay legitimate worker’s compensation claims up to $500,000 per incident. A reinsurance policy, with no limit, pays claims that exceed $500,000 for a particular incident. The pool has not assessed additional premiums to be paid by its members in the past three years. The County continues to carry commercial insurance for employees’ health and life insurance. Management belicves such coverage is sufficient to preclude any significant uninsured losses to the County. Settled claims have not exceeded insurance coverage in any of the past three fiscal years. There have been no significant reductions in insurance coverage during the 2002 fiscal year. J. Compensated Absences ‘The County docs not accrue any liability for future vacation benefits. Vacation benefits are earned by the employee during the year and must be taken during the year earned. Annual leave is accrued at the following rates: Years of Service Amount of Leave I Year 1 Week 2-4 Years 2 Weeks 5-9 Years 3 Weeks 10 Years and Over 4 Weeks This amount of accumulated unpaid vacation benefits is not material to the financial statements for the year ended June 30, 2002. The County does not accruc any liability for sick leave. Employees are not paid for accumulated sick Jeave at termination. All benefits for sick leave are based on occurrences outside the County’s or employee’s control which have not yet occurred; hence, no liability exists at June 30, 2002. K. Long-Term Obligations ‘The County reports long-term debt of governmental funds at face value in the general long-term debt account group. Certain other governmental fund obligations not expected to be financed with current available financial resources are also reported in the general long-term debt account group. L. Memorandum Only - Total Columns Total columns on the financial statements are captioned "memorandum only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position or results of operations in conformity with accounting principles generally accepted in the United 10 --- OCR page 24 of 32 --- OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 Summary of Significant Accounting Policies (continued) States of America. Interfund transactions have not been eliminated from the total column of cach financial statement. 2. Stewardship, Compliance, and Accountability Budgetary Compliance 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 by fund, 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. 3. Detailed Notes on Account Balances Title 62 O.S. § 348.3 authorizes the County Treasurer to invest in: « U.S. Government obligations © Certificates of deposit e Saving accounts e G.O. bonds issued by counties, municipalities or school districts ¢ Money judgments against counties, municipalities or school districts © Bonds and revenue notes issued by a public trust when the beneficiary of the trust is a county, municipality or school district «Negotiable certificates of deposit ¢ Prime bankers acceptances which are eligible for purchase by the Federal Reserve System «Prime commercial paper with a maturity of 180 days or less « Repurchase agreements © Money market funds regulated by the Securities and Exchange Commission and which investments consist of the above-mentioned types of investments A. Deposits At year-end, the carrying amount of the County’s deposits was $ 4,879,565 and the bank balance was 8 4,902,256. Of the bank balance, all funds were covered by federal depository insurance or collateral held by the County’s agent in the County's name. B. Receivables The County's property tax is levied cach 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 Ml --- OCR page 25 of 32 --- OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 Detailed Notes on Account Balances (continued) 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 every four (4) years.” The net assessed property value as of January 1, 2001, was $ 89,850,011. The County levied 10 mills for general fund operations, 1.5 mills for the county health department, and .34 mills for county sinking. In addition, the County also collects the ad valorem taxes assessed by cities and towns and school districts and apportions the ad valorem taxes collected to the appropriate taxing units. 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 L. 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. Current year tax collections for the year ended June 30, 2002, were approximately 95 percent of the tax levy. C. 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. County employees are required to contribute between 3.5% and 8.5% of earned compensation. The County contributes between 5.0% and 10.0% of earned compensation. Elected officials could contribute between 4.5% and 10% of their entire compensation. The County contributes 10.0% of earned compensation for elected officials. The County's contributions to the Plan for the years ending June 30, 2002, 2001, and 2000, were $234,303, $219,674, and $190,250, respectively, equal to the required contributions for each year. D. Capital Leases The County acquires road machinery and equipment through lease-purchase agreements financed by the Oklahoma Department of Transportation and/or the equipment vendors or their assignees pursuant to the provisions of 69 O.8. § 636.1 through § 636.7. Lease agreements entered into with the Oklahoma Department of Transportation (ODOT) are interest free. However, starting in January 12 --- OCR page 26 of 32 --- OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 Detailed Notes on Account Balances (continued) 1997, ODOT began charging a one-time fee of 3% on all subsequent pieces of machinery acquired. Oklahoma Statutes prohibit the County from entering into contracts of this nature longer than one year. For this reason, these Jease-purchase agreements do not qualify for capitalization until the year the lease-purchase agreements are completed and title to the equipment is transferred to the County. However, it is the County's intent to exercise its right to purchase this property; accordingly, the lease-purchase agreements have been capitalized to conform with accounting principles generally accepted in the United States of America. The unpaid portions of these agreements have been reflected as capitalized lease obligations within the general long-term debt account group. Providing all capital leases are renewed each year by resolution of the Board of Commissioners, tninimum lease commitments under capitalized lease-purchase agreements as of June 30, 2002, are as follows: Year Ending June 30, Principal Interest Total 2003 $ 267,306 $ 54,605 $ 321,911 2004 253,800 39,315 293,115 2005 196,749 25,657 222,406 2006 149,934 15,546 165,480 2007 113,054 7,532 120,586 2008 & thereafter 73,743 3,609 77,352 Total $ 1,054,586 $ 146,264 $ 1,200,850 During the year, the County capitalized teases totaling $428,631 and paid $329,349 on the outstanding balances of lease-purchase agreements. E. Judgments Payable The County has a judgment which is being retired by a tax levy. The County is obligated to pay the judgment over a three-year period. During the fiscal year ending June 30, 2002, principal payments of $ 9,571 and interest payments of $ 1,697 were made on this judgment. The future principal due on this judgment is $9,570, payable in fiscal 2003. 13 --- OCR page 27 of 32 --- OTTAWA COUNTY, OKLABOMA NOTES TO THE FINANCIAL STATEMENTS . JUNE 39, 2002 a Detailed Notes on Account Balances (continued) F. Long-Term Debt Changes in Long-Term Debt During the year ended June 30, 2002, the following changes occurred in liabilities reported in the general jong-term debt account group: Balance Balance July 1, 2001 Additions Reductions June 30, 2002 Judgments payable 8 19141 $ $s 9571 § 9,570 Gencral obligation debt 250,000 15,000 235,000 Capital leases 955,304 428,631 329,349 1,054,586 Total $1,224,445 $$ 428,631 «$353,920 81,299,156 G. Fund Equity Reservations of fund balances of governmental funds are established to either (1) satisfy legal covenants that require a portion of the fund balance be segregated or (2) identify the portion of the fund balance that is not appropriable for future expenditures. Designated fund balance represents tentative plans for expenditures which is available for appropriation. Specific reservations and designations of the fund balance accounts are summarized below: Reserved for Encumbrances ~ The reserve for encumbrances represents encumbrances outstanding at the end of the year based on purchase orders and contracts signed by the County but not completed as of the close of the fiscal year. Reserved for Debt Service — The reserve for debt service was established to indicate that the fund balance or portion thereof is required by law to be used for the payment of any outstanding bonds, interest, or judgments against the County. Designated for Capital Project — The current fund balance in the capital project fund is to be used to construct a modern jail facility. H. Sales Tax On September 15, 1992, Ottawa County voters approved a one-half cent sales tax. The tax ran for four years, and on October 21, 1996, was permanently modified by resolution to one-half cent effective November 1, 1996. The purpose of the tax is the construction, maintenance, and operation of a modem jail facility and operation of the Ottawa County Sheriff's Department. The one-half cent sales tax is apportioned to the general fund for the operation of the Sheriff's Department. 14 --- OCR page 28 of 32 --- OTTAWA COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 Detailed Notes on Account Balances (continued On November 3, 1998, Ottawa County voters approved a 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. The one-half cent sales tax is apportioned to the county highway sales tax fund for the designated purpose. 1. Fuel Taxes 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 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 County highway fund is reported herein as “special revenue,” and the fuel tax revenue is presented as “‘intergovernmental.” 4. Contingent Liabilities The government is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the government attorney, the resolution of these matters will jot have a material adverse effect on the financial condition of the government. 1s --- OCR page 29 of 32 --- Report on Compliance and on Internal Contre] Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards --- OCR page 30 of 32 --- jh. { ey a Seely NC 7 STATE OF OKLAHOMA OFFICE OF THE AUDITOR AND INSPECTOR JEFF A. McMAHAN State Auditor and Inspector Report on Compliance and on Internal Contro] Over Financial Reporting 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 financial statements of Ottawa County, Oklahoma, as of and for the year ended. June 30, 2002, and have issued our report thereon dated March 25, 2003. We qualified our opinion because the general fixed assets account group was not included in the financial statements. 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 Gencral of the United States. Compliance As part of obtaining reasonable assurance about whether Ottawa County's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, and contracts, 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 that are required to be reported under Government Auditing Standards. Intemal Control Over Financial Reporting In planning and performing our audit, we considered Ottawa County’s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the intemal control over financial reporting. However, we noted a certain matter involving the intemal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect the County's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. The reportable condition is described below. ‘2300 North Lincoin Boulevard « Room 100 State Capitol - Okdahoma City, OK 73105-4801 + (405) 521-2495 + Fax (405) 621-2426 - wwwsaistate.ok.us --- OCR page 31 of 32 --- Finding 98-1 - (Repeat Finding) Criteria: Accounting principles generally accepted in the United States of America for a governmental entity using governmental fund types require the presentation of the general fixed assets account group (GFAAG) in the financial statements. Condition: Information is not available for reporting general fixed assets in accordance with accounting principles generally accepted in the United States of America for a government entity. The general fixed assets contro! account is not accurate. Effect: This component of internal control is not effective. Accordingly, there is a greater risk that a fixed asset may not be properly accounted for and safeguarded against loss. Recommendation: We recommend records include acquisition cost, a complete description, purchase date, location of such asset, and that a control total of the cost of these assets be maintained and reconciled annually. Management’s Corrective Action Plan- Contact Person: Reba Sill, Ottawa County Clerk Anticipated Completion Date: None Corrective Action Planned: No planned corrective action is anticipated to obtain fixed assets records in such a manner that general fixed assets could be reported in accordance with accounting principles generally accepted in the United States of America. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions, and accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we consider the Teportable condition described above to be a material weakness. The American Institute of Certified Public Accountants’ Statement on Auditing Standards No. 87 requires the inclusion of the following paragraph in this report: This report is intended solely for the information and use of the management of the County and is not intended to be and should not be used by anyone other than these specified parties. WW --- OCR page 32 of 32 --- However, the Oklahoma Open Records Act states that all records of public bodies and public officials shall be open to any person, except as specifically exempted. The purpose of this Act is to ensure and facilitate the public's right of access to and review of government records so they may efficiently and intelligently exercise their inherent political power. Therefore, this report is a mattcr of public record and its distribution is in no way limited or restricted. Sincerely, JEFF A. MCMAHAN State Auditor and Inspector March 25, 2003 18