Agenda - 11-16-2010 - 3a - Laserfiche WebLink

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~/1ART' I N •~+ 5 TARN E S & ASSOCIATES, CPAs, P.A. 'A Prclfessio~taJ:4ssuciurion of Certified Puhlic Accor~ntunts and :~Llulragement Coi~sulfunts" To the Board of Commissioners Orange County, North Carolina In planning and performing our audit of Orange County, North Carolina's basic financial statements for the year ended June 30, 2010, we considered the County's internal control structure to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on the internal control structure. We previously reported on the Orange's internal control structure in our report dated November 11, 2010. This letter does not affect that report or our report on the financial statements dated November 11, 2010. During our audit, we noted certain matters involving internal controls and other operational matters that are presented for your consideration. We will review the status of these comments during our next audit engagement. Our comments and recommendations, all of which have been discussed with appropriate members of management, are intended to improve the internal control or result in other operating efficiencies. We will be pleased to discuss these comments in further detail at your convenience, perform any additional study of these matters, or assist you in implementing the recommendations. Our comments are summarized as follows: Lack of Written Internal Control Policies. During our audit, we noted that the Finance Department does not have written internal control policies. Management is responsible for identifying and documenting internal controls and the objectives that they were designed to achieve. During our internal control inquiries, we noted that controls are in place, are verbally communicated, and are understood by finance employees. However, these controls have not been properly documented and distributed as a formal department policy. Documentation of the design of controls is evidence that the controls are identified, capable of being communicated to those responsible for their performance, and capable of being monitored and evaluated by the entity. Recommendation - We recommend that the Finance Department prepare written internal control policies. Internal controls should be documented for, but not limited to, the following major areas: cash receipts, cash disbursements, payroll, and general ledger access. The documentation should include information on user rights, who can access various accounting modules, the approval process and data entry for budget amendments, budget oversight, and journal entries. Management's documentation may take various forms, for example, entity policy manuals, narrative memoranda, or procedural write-ups. In addition, the Finance Department should continue to actively review and update internal controls for any changes in department structure or transactions. 730 13th Avenue Drive SE ~ Hickory, North Carolina 28602 ~ Phone 828-327-2727 ~ Fax 828-328-2324 13 South Center Street • Taylorsville, North Carolina 28681 • Phone 828-632-9025 • Fax 828-632-9085 Toll Free Both Locations 1-800-948-0585 • Website: www.martinstarnes.com