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AAT <br /> 16 <br /> Orange County, North Carolina <br /> Management Letter Comments (Recommendations) <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 expenditure <br /> activity (outside of a journal entry writing off liabilities) for the fiscal year under audit. Based on our review of the general <br /> ledger activity, it appears the County is still accounting for this fund as if it was still a custodial fund of the County where all <br /> amounts are received as cash and offset with a corresponding liability. With the change in accounting standard that was <br /> brought about by GASB Statement No. 84, Fiduciary Activities, this fund was reclassified to a special revenue fund in previous <br /> years and 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 activity for the fiscal year ended June 30, 2025, was not material, an audit adjustment to <br /> reclassify the activity was not required. However, we recommend County staff implement additional internal controls or <br /> additional annual closeout procedures to the ensure the amounts are properly recorded in accordance with generally accepted <br /> accounting principles(GAAP). <br /> • Lack of Annual Budget Adoption - Special Revenue Fund <br /> During our audit, we noted that the County did not adopt an annual budget for one of its Special Revenue Funds for the fiscal <br /> year ended June 30, 2025. North Carolina General Statutes and the County's budgetary policies require that all funds subject to <br /> budgetary control have a formally adopted annual budget. Without an adopted budget, expenditures and revenues in the <br /> Special Revenue Fund were not subject to formal budgetary control, increasing the risk of unauthorized spending and <br /> noncompliance with state law and County policies. We recommend that management ensure all Special Revenue Funds are <br /> reviewed annually during the budget process and that an adopted budget ordinance is approved for each fund, regardless of <br /> the activity level. <br /> Auditor's Discussion &Analysis (AD&A) Going Further. <br /> June 30, 2025 <br />