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12 <br /> 1 Slide #16 <br /> 4WV Orange County,North Carolina <br /> Audit Findings(Continued] <br /> 2024-003 Annual Financial Closeout and Preparation of Records for the Audit <br /> Issue: The County's review and manual adjustments were not sufficient to prevent,or detect and correct,material <br /> misstatements in the Couri financial statements- <br /> Cause/Context: During the audit for the year ended June 30,2024,material audit adjustments were required to <br /> correct current year balances in several audit areas: <br /> Audit adjustments totaling approximately$6,350.000 were required to properly reflect debt proceeds,debt <br /> payments,deb t p re m i u ms an d inte rest expen ditures 1 expen ses- <br /> Audit adjustments totaling approximately S1.100,00D were required to correct the reporting of the County's <br /> capital assets.The County incorrecty expensed construction costs that were capital in nature and should have <br /> been reported as capital assets. <br /> Across several of the Couno/s funds,issues were noted with both accounts payable and accounts receivable <br /> balances. The amounts reported in the County's general ledger did not agree and reconcile with the <br /> underlying detailed listings or subsidiary ledgers. These differences led to delays In receiving from the County <br /> staff final accounts receivable and accounts payable balances with proper documentation to support the <br /> ending balances reported- <br /> Effect: While the errors were identified and corrected during the audit the incomplete financial close process <br /> resulted in increased reconciliation efforts from County staff,increased potential risk for misstatements,and delays <br /> in f nalixing financial statements,requiring additional review and adjustments. <br /> County Response: The county acknowledges the audit finding and Is committed to Improving Its flnancall reporting <br /> processes and internal controls to ensure compliance with generally accepted accounting principles(GAAP).We <br /> recognize the need for enhanced financial statement preparation,reconciliations,and timely review processes to <br /> prevent material misstate me nts a nd e n sure accurate f in a ncia I repo rt i ng- <br /> Auditor's Discussion&Analysis(AD&A) <br /> June 30,2024 <br /> 2 <br /> 3 Commissioner McKee emphasized that the issues here are not missing money, but mis- <br /> 4 entries into ledgers. <br /> 5 <br /> 6 Slide #17 <br /> >4f <br /> Orange County,North Carolina <br /> Audit Findings(Continued} <br /> • 2024-004 Reporting Requirements for Section 8 Housing Program <br /> Public Housing Agencies{PHAsy are required to submit timely a Financial Assessment Sub-system(FASS-PHy GAAP- <br /> based unaudited and audited financial information eteetronica lly to HUD- In the course of performing our Single <br /> Audit testing,we noted the County had not submitted the 2023 FA55-PH report due to turnover in key positions. <br /> No questioned casts noted. <br /> The County completed the FA5S-PH report and it has been submitted to HUD for 2023;additionally,the County has <br /> added this report to its annual year-end checklist going forward. <br /> Management Point(Recommendation) <br /> Accounting for Special Revenue Funds <br /> During our review of the County's financial statements,we noted the DSS Payee Fund did not have any revenue or <br /> expenditure activity for the fiscal year under audit. Based on our review of the general ledger activity,It appears the <br /> County is still accounting for this fund as if it was still a custodial fund of the County where all amounts are received <br /> as cash and offset with a corresponding liability.With the change in accounting standard that was brought about by <br /> GASS 5tatement No.M,FiduciaryActrvides,this fund was reclassified to a special revenue fund in previous years and <br /> should be reflecting the inflows it receives during the fiscal year as revenues and conversely,the outflows as <br /> expenditures. Due to the fact that the activlty for the fiscal year ended June 30,2024,was not material,an audit <br /> adjustment to reclassify the activity was not required. however,we recommend County staff implement additional <br /> internal controls or additional annual closeout procedures to the ensure the amounts are properly recorded in <br /> a ccorda nce with gen a rally accepted accounting p ri n ci pies(GAAP). <br /> Auditor's Discussion&Analysis(AD&A) <br /> June 30,2024 <br /> 7 <br /> 8 <br />