Receive and file the County's annual financial statements and independent auditor's report for the fiscal year ending June 30, 2023. (No general fund impact) (Haynes)

Receive and file the County's annual financial statements and independent auditor's report for the fiscal year ending June 30, 2023. 

On June 6, 2024, the Department of Financial Services (DFS) issued the County’s audited financial statements for the fiscal year ending June 30, 2023, including the Annual Comprehensive Financial Report (ACFR) and the audit of federal expenditures (or Single Audit).  While the County’s financial statements received an unmodified (clean) option from our independent auditors, the completion of the financial statements and associated audit was significantly later than in prior years.  In addition, the audit resulted in several findings, which are discussed in more detail below.

Federal guidelines require that the Single Audit be filed with the Federal Audit Clearinghouse no later than March 31st of each year. Unfortunately, despite significant effort and diligence from both DFS staff and our external auditors, we were unable to meet that deadline.  It is important to note that there is no fine or monetary penalty as a result of missing the March 31st deadline.  However, for the next several years the County will be subject to a more in-depth audit of our federal programs.

The lengthy delay in issuing the County’s financial statements is due to four primary factors: (1) implementation of the new Infor CloudSuite financial system in July 2023; (2) significant turnover and loss of key employees in DFS, including the Accounting Manager and two Supervising Accountants; (3) competing priorities and deadlines with limited staffing resources; and (4) issues discovered during the audit regarding accounting and reconciliation of capital assets.

As mentioned above, the audit of the County’s financial statements resulted in four findings, as outlined below:

2023-001 Accounting System Reconciliation – The auditors recommend that the County reconcile the completed accounting records used for financial reporting back to the trial balance and general ledger annually to ensure all operational transactions are captured. Staff agree with this recommendation and commit to implementing it by June 30, 2025.
               
2023-002 Grant Activity Reconciliation – The auditors recommend that the County ensure that sufficient year-end closing procedures are implemented to ensure expenses are properly captured in the correct fiscal year. Staff agree with this recommendation and are currently implementing improved procedures that will be used as part of the 2023-24 year-end closing process.

2023-003 Timeliness in Financial Reporting – The auditors recommend that the County establish a well-defined process for annual financial reporting and develop more resources to assist in the preparation of the annual financial reports. Staff agree with this recommendation and are in the process of developing training plans and process improvements to implement this recommendation by March 31, 2025.

2023-004 Financial Close and Reporting – The auditors recommend that the County put in place formal year-end closing procedures to ensure accounting records are complete and reduce the number of corrections and adjustments that are needed after the closing process is finalized. Staff agree with this recommendation and are currently developing training plans for accounting staff and implementing improved procedures that will be used as part of the 2023-24 year-end closing process.

Additional information on these findings and recommendations can be found in the attached Independent Auditors’ Report on Internal Controls over Financial Reporting (Attachment B).

While it is the County’s goal to have an audit report that is free of findings, we appreciate the independent auditors’ frank assessment of our processes and procedures.  The Department of Financial Services has begun developing process improvements and training plans for all accounting staff, and we are committed to implementing the changes and improvements necessary to ensure that our accounting records and financial reports are accurate and timely. 

The County's financial statements and associated findings from the County's independent auditors were discussed at the Financial Oversight Committee meeting on June 13, 2024.