Agenda 01-20-2026; 4-b - Presentation of Annual Comprehensive Financial Report for FYE 6-30-2025 and Approval of Audit Services Contract Amendment

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AAT 15 Orange County, North Carolina Audit Findings • 2025-001 Accounting for Lease Activity Issue: We noted that the County did not record the current year lease activity required under GASB 87. A new material lessor lease executed during the fiscal year was not recorded in the County's financial statements, as well as the current year additions for lessee leases were not recorded. As a result, both lessee and lessor lease activity for the fiscal year was incomplete in the accounting records and thus audit adjustments of approximately $7.3 million were required to properly report the County's leasing activity in accordance with GAAP. • 2025-002 Reporting of Accounts Payable and Related Balances Issue: During our search for unrecorded liabilities, we identified multiple vendor invoices relating to goods and services received prior to year-end that were not accrued to the appropriate fiscal year. These invoices were instead recognized in the subsequent fiscal year when processed, resulting in a misstatement of accounts payable and expenditures. As a result, audit adjustments totaling approximately $700,000 were required to properly report the County's liability for accounts payable and the related expenditures/ expenses for fiscal year 2025. • 2025-003 Prior Period Adjustment Issue: We noted that the County recorded sales and use tax refund receipts after year-end as revenue, despite the related receivable and revenue having already been recognized in prior fiscal years. This resulted in duplicate recognition of revenue and thus audit adjustments were required to properly reduce outstanding receivable balances and to restate beginning fund balance of the County's General Fund to address the errors in revenue recognition that occurred in previous years. Auditor's Discussion &Analysis (AD&A) Going Further. June 30, 2025