COMPLIANCE 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

 

*           Report on Compliance with Requirements Applicable to Each Major Federal Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 and the State Single Audit Implementation Act.

 

*           Report on Compliance with Requirements Applicable to Each Major State Program and Internal control Over Compliance in Accordance with Applicable Sections of OMB Circular A-133 and the State Single Audit Implementation Act.

 

*           Schedule of Findings and Questioned Costs

 

*           Corrective Action Plan

 

*           Summary Schedule of Prior Audit Findings

 

*           Schedule of Expenditures of Federal and State Awards

 


 

 

 

REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS

 

 

Board of County Commissioners

Harnett County, North Carolina

 

We have audited the general purpose financial statements of Harnett County, North Carolina, as of and for the year ended June 30, 2001, and have issued our report thereon dated October 12, 2001.  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.

 

Compliance

As part of obtaining reasonable assurance about whether Harnett County’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, 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 three instances of noncompliance that are required to be reported under Government Auditing Standards, which are described in the accompanying Schedule of Findings and Questioned costs as Items 01-1, 01-2 and 01-3.

 

Internal Control Over Financial Reporting

In planning and performing our audit, we considered Harnett 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 internal control over financial reporting.  However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions.  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 Harnett County’s ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements.  Reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as Item 01-4.

 

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 believe none of the reportable conditions described above is a material weakness.   We noted other matters involving the internal control over financial reporting that we have reported to management of Harnett County  in a separate letter dated October 12, 2001.

 

This report is intended for the information and use of the audit committee, management, others within the organization, members of the Board of Commissioners, and federal and State awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties.

 

 

 

 

Fayetteville, North Carolina

October 12, 2001


 

 

 

 

 

 

 

REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR FEDERAL PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 AND THE STATE SINGLE AUDIT IMPLEMENTATION ACT

 

 

Board of County Commissioners

Harnett County, North Carolina

 

 

Compliance

We have audited the compliance of Harnett County, North Carolina, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement and the Audit Manual for Governmental Auditors in North Carolina, issued by the Local Government Commission, that are applicable to each of its major federal programs for the year ended June 30, 2001.    Harnett County’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.  Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of Harnett County’s management.  Our responsibility is to express an opinion on  Harnett County’s compliance based on our audit.

 

We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards,1 issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and the State Single Audit Implementation Act.  Those standards, OMB Circular A-133, and the State Single Audit Implementation Act require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred.  An audit includes examining, on a test basis, evidence about  Harnett County’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinion.  Our audit does not provide a legal determination on  Harnett County’s compliance with those requirements.

 

In our opinion, Harnett County complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 2001.

 

Internal Control Over Compliance

The management of Harnett County is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs.  In planning and performing our audit, we considered Harnett County’s internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133 and the State Single Audit Implementation Act.


Board of County Commissioners

Harnett County, North Carolina

Page 2

 

 

Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses.  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 noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions.  We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.

 

This report is intended for the information and use of the audit committee, management, others within the organization, members of the Board of Commissioners, and federal and State awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties.

 

 

 

 

Fayetteville, North Carolina

October 12, 2001

 


 

 

 

 

 

 

 

REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR STATE PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH APPLICABLE SECTIONS OF OMB CIRCULAR A-133 AND THE STATE SINGLE AUDIT IMPLEMENTATION ACT

 

 

Board of County Commissioners

Harnett County, North Carolina

 

 

Compliance

We have audited the compliance of Harnett County, North Carolina, with the types of compliance requirements described in the Audit Manual for Governmental Auditors in North Carolina, issued by the Local Government Commission, that are applicable to each of its major State programs for the year ended June 30, 2001.   Harnett County’s major State programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.  Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major State programs is the responsibility of Harnett County’s management.  Our responsibility is to express an opinion on Harnett County’s compliance based on our audit.

 

We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards,1 issued by the Comptroller General of the United States; applicable sections of OMB Circular A-133 as described in the Audit Manual for Governmental Auditors in North Carolina, and the State Single Audit Implementation Act.  Those standards, applicable sections of OMB Circular A-133, and the State Single Audit Implementation Act require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major State program occurred.  An audit includes examining, on a test basis, evidence about Harnett County’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinion.  Our audit does not provide a legal determination on Harnett County’s compliance with those requirements.

 

In our opinion, Harnett County complied, in all material respects, with the requirements referred to above that are applicable to each of its major State programs for the year ended June 30, 2001. 

 

Internal Control Over Compliance

The management of Harnett County is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to State programs.  In planning and performing our audit, we considered Harnett County’s internal control over compliance with requirements that could have a direct and material effect on a major State program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with applicable sections of OMB Circular A-133 and the State Single Audit Implementation Act.

 

 

 

 

 

 

 

 

Board of County Commissioners

Harnett County, North Carolina

Page 2

 

 

Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses.  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 noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major State program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions.  We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.

 

This report is intended for the information and use of the audit committee, management, others within the organization, members of the Board of Commissioners, and federal and State awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties.10

 

 

 

 

Fayetteville, North Carolina

October 12, 2001

 

 


SECTION I.  Summary of Auditor’s Results

 

        Financial Statements

 

        Type of auditor’s report issued:  Unqualified

 

        Internal control over financial reporting:

 

                -       Material weakness(es) identified                               Yes            X          No

 

                -       Reportable condition(s) identified

                        that are not considered to be

                        material weaknesses                                        X         Yes                         None reported

 

                Noncompliance material to financial

                  statements noted                                                               Yes            X          No

 

                Federal Awards

 

                Internal control over major federal programs:

 

                -       Material weakness(es) identified                               Yes            X          No

 

                -       Reportable condition(s) identified

                        that are not considered to be

                        material weaknesses                                                    Yes             X         None reported

 

                Type of auditor’s report issued on compliance for major federal programs:  Unqualified

               

                Any audit findings disclosed that are

                  required to be reported in accordance

                  with Section 510(a) of Circular A-133                             Yes             X         No

 

                Identification of major federal programs:

 

                    CFDA Numbers                Names of Federal Program or Cluster        

                        Subsidized Child Care Program Cluster:

                                93.558                     Temporary Assistance for Needy Families

                             93.575                        Child Care Development Fund Discretionary

                             93.596                        Child Care Development Fund, Mandatory/Match

                             93.667                        Social Services Block Grant

                             N/A                                           TANF Maintenance of Effort

                             N/A                                           TANF Maintenance of Effort – Smart Start

                             N/A                                           State Appropriations

     N/A                                   Smart Start 

                       

                        93.558                                             Temporary Assistance for Needy Families

                        10.551, 10.561                                Food Stamp Cluster            

                        93.778                                             Medical Assistance Program                            

                        10.557                                             Special Supplemental Nutrition Program for

   Women, Infants & Children           


SECTION I.  Summary of Auditor’s Results (continued)

 

        Dollar threshold used to distinguish

          between Type A and Type B Programs                                 $            1,730,257

 

        Auditee qualified as low-risk auditee?                         X         Yes                         No

 

        State Awards

 

        Internal control over major State programs:

 

        -       Material weakness(es) identified                                       Yes            X          No

 

        -       Reportable condition(s) identified

                that are not considered to be

                material weaknesses                                                            Yes             X         None reported

 

        Type of auditor’s report issued on compliance for major State programs:  Unqualified

       

        Any audit findings disclosed that are

          required to be reported in accordance

          with the State Single Audit

          Implementation Act                                                                   Yes             X         No

 

        Identification of major State programs:

 

                Program Name

                Special Assistance to Adults                                                                           

                Smart Start

                Public School Building Bonds                          

                TANF – Maintenance of Effort

 

II.  Financial Statement Findings

 

*Prior year findings repeated in the current year are indicated by an asterisk (*).

 

REPORTABLE CONDITIONS

 

(*) FINDING:              01-1

 

Non-Compliance with Laws and Regulations

 

Criteria:                                    North Carolina General Statutes require that fund deficits be “fully appropriated” when adopting the budget ordinance for the subsequent year.  For General Statute purposes, “fully appropriated” means a transfer that affects fund balance rather than a loan.

 

Condition:                               The fund deficit in the Section 8 Housing Fund (the “Fund”) of approximately $134,731 as of June 30, 2000 was not “appropriated” during fiscal 2001.  The fund deficit at June 30, 2001 was $226,482.

 

Effect:                                       Non-compliance with regulations.

 

Cause:                                      The Board is aware of the deficit, which occurs due to the timing of payments.

 

Recommendation:                  Management needs to, on a periodic basis, evaluate the ability of the Fund to fund the deficit and appropriate the funds if necessary.

 

 

 

II.  Financial Statement Findings (continued)

 

FINDING:                    01-2

 

Non-Compliance with Laws and Regulations

 

Criteria:                                  North Carolina General Statutes require that fund deficits be “fully appropriated” when adopting the budget ordinance for the subsequent year.  For General Statute purposes, “fully appropriated” means a transfer that affects fund balance rather than a loan.

 

Condition:                               There is a fund deficit in the Special Districts Fund of approximately $864 as of June 30, 2001, and was not “appropriated” during fiscal 2001.

 

Effect:                                       Non-compliance with regulations.

 

Cause:                                      Appropriation did not occur on a timely basis.

 

Recommendation:                  Management should appropriate the fund deficit.

 

FINDING:                    01-3

 

Non-Compliance with Laws and Regulations

 

Criteria:                                    North Carolina General Statutes require that actual expenditures do not exceed appropriated expenditures at the legal level of budgetary control.

 

Condition:                               The budgetary ordinance for the county is prepared at the department level.  During the year ended June 30, 2001, expenditures exceeded appropriated amounts at the level of budget ordinance appropriation as follows:

 

Effect:                                       Non-compliance with regulations.

 

Recommendation:                  We recommend that the County implement a process whereby they monitor the budget versus actual financial results monthly in order to identify the need for budgetary amendments prior to the end of the fiscal year.


II.                   Financial Statement Findings (continued)

 

(*) FINDING:              01-4

 

Internal Controls

 

Criteria:                                    Internal controls are enhanced when the responsibilities for executing a transaction, recording the transaction, and maintaining custody of the assets resulting from the transaction are assigned to different individuals.  Appropriate documentation should be used consistently throughout the departments.

 

Condition:                               In reviewing cash receipt procedures in offices outside the Finance Department, we noticed a lack of segregation of duties in many of those offices due to the small number of employees.  Internal controls are enhanced when the responsibilities for executing a transaction, recording the transaction, and maintaining custody of the assets resulting from the transaction are assigned to different individuals.  Also, the transportation department does not use prenumbered receipts when accepting cash.

 

Effect:                                       While it may be convenient to have one person authorized to receive cash, record the accounts receivable payment, and make the deposit to Finance, such a situation does not provide the ideal internal control structure. 

 

Cause:                                      Many departments have a small number of employees, resulting in difficulty in achieving adequate segregation of duties. 

 

Recommendation:                  We believe it would be in the County’s best interests to implement a rotation schedule for the review of controls related to cash receipts in each ancillary department to see whether they can be strengthened.  The Finance department should work with all departments, especially the transportation department, to develop the appropriate documentation for accepting cash receipts.

 

 

III.   Federal Award Findings and Questioned Costs

 

None reported.

 

 

IV. State Award Findings and Questioned Costs

 

None reported.

 

_________________________

Notes to the preceding schedule

 

1.  Federal programs that did not meet the criteria for a major program using the criteria discussed in OMB Circular No. A-133 Section .520 but were tested as a major program because the State awards met the threshold for a major State program are included in the list of major federal programs.


 

Section II - Financial Statement Findings

 

Finding: 01-1

 

        A.            Name of Contact Person:            Vanessa W. Young, Finance Officer

B.            Corrective Action:               The Board is aware of the deficit in the Fund.  Checks for this fund are written at the end of the month, while funds are received at the beginning of the following month.  The General Fund covers any deficit that occurs due to timing. 

C.            Proposed Completion:         Corrective action to be taken as funds become available.

 

Finding: 01-2

 

        A.            Name of Contact Person:            Vanessa W. Young, Finance Officer

B.            Corrective Action:               The deficit in the Emergency Response Planning Fund will be appropriated by the Board.

C.            Proposed Completion:         Corrective action to be taken as funds become available.

 

Finding: 01-3

 

        A.            Name of Contact Person:            Vanessa W. Young, Finance Officer

B.            Corrective Action:               Financial statements will be reviewed on a timely basis to ensure that all required budgetary amendments are obtained prior to the end of the fiscal year.

C.            Proposed Completion:         Corrective action to be taken as funds become available.

 

Finding:         01-4

 

        A.            Name of Contact Person:            Vanessa W. Young, Finance Officer

B.            Corrective Action:               Management will continue to monitor these activities and when applicable, reassign incompatible duties among new personnel as funding becomes available.

C.            Proposed Completion:         Corrective action to be taken immediately upon completion of audit.

 

 


 

Finding:         00-1

 

Status:                          A similar error was found this year.

 

Corrective Action:      See corrective action plan at Finding 01-1.

 

Finding:         00-2                               

 

Status:            Corrected.

 

Finding:         00-3

 

Status:                          A similar error was found this year.

 

Corrective Action:      See corrective action plan at Finding 01-3.

 

Finding:         00-4                               

 

Status:                          A similar error was found this year.

 

Corrective Action:      See corrective action plan at Finding 01-4.

 

Finding:         00-5

 

Status:            Corrected.

 

Finding: 00-6

 

Status:            Corrected.

 

Finding: 00-7

 

Status:            Corrected.

 

Finding: 00-8

 

Status:            Corrected.

 

Finding: 00-9

 

Status:            Corrected.

 

 

 


 

1.     GENERAL

 

The Schedule of Expenditures of Federal and State Awards (the “Schedule”) presents the activity of all federal and State financial award programs of Harnett County, North Carolina.  Harnett County, North Carolina (“Harnett County”) reporting entity is defined in Note 1 to the general purpose financial statements.  All federal and State awards received directly from federal and State agencies as well as federal financial awards passed through other government agencies are included in the Schedule.

 

2.       BASIS OF ACCOUNTING

 

The accompanying Schedule is presented using the modified accrual basis of accounting, which is described in Note 1 to the general purpose financial statements.

 

3.       BENEFIT PAYMENTS ISSUED BY THE STATE

 

Benefit payment amounts which were paid directly by the State from federal and State monies on behalf of Harnett County have been separately identified and quantified on the Schedule.  These direct payments do not appear within the general purpose financial statements of Harnett County because these amounts are not revenues and expenditures of Harnett County, North Carolina.  County personnel are involved in certain functions, primarily with eligibility determinations, that cause benefit payments to be issued by the State.

 

4.       AMOUNTS PROVIDED TO SUBRECIPIENTS

 

During the year ended June 30, 2001, Harnett County passed through monies received from the North Carolina Department of Public Instruction of $2,894,297 in connection with public school funding provided to Harnett County Board of Education as a subrecipient.