Transcription

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19 Rehmann Robson 107 S. Cass St., Suite A Traverse City, MI Ph: Fx: INDEPENDENT AUDITORS REPORT June 30, 2011 To the Board of Commissioners of Grand Traverse County Traverse City, Michigan We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Grand Traverse County, Michigan (the County ), as of and for the year ended December 31, 2010, which collectively comprise the County s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the management of Grand Traverse, Michigan. Our responsibility is to express opinions on these financial statements based on our audit. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County as of December 31, 2010, and the respective changes in financial position and, where applicable, cash flows, and the respective budgetary comparison for the General Fund and each major special revenue fund, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. -2-

20 In accordance with Government Auditing Standards, we have also issued a report dated June 30, 2011, on our consideration of the County s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Management s Discussion and Analysis and Schedules of Funding Progress on pages 4 through 13 and 76 through 78 are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County s financial statements as a whole. The introductory section, combining and individual fund financial statements, and statistical section, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the financial statements. The combining and individual fund financial statements and the schedule of expenditures of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion them. -3-

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

108

109

110

111

112

113

114

115

116

117

118

119

120

121

122

123

124

125

126

127

128

129

130

131

132

133

134

135

136

137

138

139

140

141

142

143

144

145

146

147

148

149

150

151

152

153

154

155

156

157

158

159

160

161

162

163

164

165

166

167

168

169

170

171

172

173

174

175

176

177

178

179

180

181

182

183

184

185

186

187

188

189

190

191

192

193

194

195

196

197

198

199

200

201

202

203

204

205

206

207

208

209 SINGLE AUDIT ACT COMPLIANCE -SA1-

210 Rehmann Robson 107 S. Cass St., Suite A Traverse City, MI Ph: Fx: INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS June 30, 2011 To the Board of Commissioners of Grand Traverse County Traverse City, Michigan We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Grand Traverse County, Michigan (the County ) as of and for the year ended December 31, 2010, which collectively comprise the County s basic financial statements and have issued our report thereon dated June 30, 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered the County s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the County s internal control over financial reporting. Our consideration of the internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as described in the schedule of findings and questioned costs, we identified a certain deficiency in internal control over financial reporting that we consider to be a material weakness and another deficiency that we consider to be a significant deficiency. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiency described in the accompanying schedule of findings and questioned costs as item to be a material weakness. -SA2-

211 A significant deficiency is a deficiency or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiency described in the accompanying schedule of findings and questioned costs as item to be a significant deficiency. Compliance and Other Matters As part of obtaining reasonable assurance about whether the County s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, 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 no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to management of the County in a separate letter dated June 30, The County s responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. We did not audit the County s responses and, accordingly, we express no opinion on them. This report is intended solely for the information and use of management, the Board of Commissioners, others within the organization, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. -SA3-

212 Rehmann Robson 107 S. Cass St., Suite A Traverse City, MI Ph: Fx: INDEPENDENT AUDITORS REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 June 30, 2011 To the Board of Commissioners of Grand Traverse County Traverse City, Michigan Compliance We have audited the County s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the County s major federal programs for the year ended December 31, The County s major federal programs are identified in the summary of auditors 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 the County s management. Our responsibility is to express an opinion on Grand Traverse County Michigan s compliance based on our audit. The County s basic financial statements include the operations of the Grand Traverse County Road Commission discretelypresented component unit. Our audit, described below, did not include the operations of the Grand Traverse County Road Commission because the component unit arranged to have its audit completed separately. 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, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 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 the 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 of the County s compliance with those requirements. -SA4-

213 In our opinion, the County complied, in all material respects, with the requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, However, the results of our auditing procedures disclosed instances of noncompliance with those requirements, which are required to be reported in accordance with OMB Circular A-133 and which are described in the accompanying schedule of findings and questions costs as items , , , and Internal Control Over Compliance Management of the County is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the County s internal control over compliance with the 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 an internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the County s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, we identified certain deficiencies in internal control over compliance that we consider to be significant deficiencies as described in the accompanying schedule of findings and questioned costs as items , , , and A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. The County s responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. We did not audit the County s responses and, accordingly, we express no opinion on the responses. This report is intended solely for the information and use of management, the Board of Commissioners, others within the organization, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. -SA5-

214 GRAND TRAVERSE COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDING DECEMBER 31, 2010 Pass Federal Grantor/Pass through Grantor/ through Award Program Title CFDA # Grantor # Amount Expenditures U.S. DEPARTMENT OF AGRICULTURE Passed through Michigan State University Supplemental Nutrition Assistance Program-Education n/a- $ 76,846 $ 23,068 Passed through the Michigan Department of Community Health Women, Infants and Children Program (WIC) n/a- 440, ,684 Total U.S. Department of Agriculture 377,752 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Passed through the Michigan State Housing Development Authority Community Development Block Grant M HOA 300, ,296 Home Investment Partnership M ,000 55,098 Total U.S. Department of Housing and Urban Development 222,394 U.S. DEPARTMENT OF THE INTERIOR Direct Program Cooperative Agreement J019 10,000 1,167 U.S. DEPARTMENT OF JUSTICE Direct Programs Safe Havens Supervised Visitation and Safe Exchange Program n/a- 400,000 11,488 State Criminal Alien Assistance Program (SCAAP) n/a- 1,010 1,010 Bullet Proof Vest n/a- 4,727 2,397 ARRA - Justice Assistance Program SB-B ,724 56,724 Justice Assistance Grant Program n/a- 13,804 13,804 Investigative and Enforcement Technology Enhancement (JAG) n/a- 11,911 11,911 Passed through Missaukee County, Michigan Anti-Drug Abuse Act - TNT Officer Z 33,640 23,103 Anti-Drug Abuse Act - TNT Officer B 34,560 9,838 Passed through the Michigan Office of Juvenile Justice Juvenile Justice Accountability Incentive Block Grant JABGN , Juvenile Justice Accountability Incentive Block Grant JABGN ,618 34,022 Passed through the Michigan Department of State Police ARRA - Pilot Mental Health Courts SCAO ,000 20,801 ARRA - Pilot Mental Health Courts SCAO ,500 7,307 Total U.S. Department of Justice 192,484 continued -SA6-

215 GRAND TRAVERSE COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (CONTINUED) FOR THE YEAR ENDING DECEMBER 31, 2010 Pass Federal Grantor/Pass through Grantor/ through Award Program Title CFDA # Grantor # Amount Expenditures U.S. DEPARTMENT OF TRANSPORTATION Passed through the Michigan Office of Highway Safety Planning OHSP Safe Communities Grant: Police Traffic Services (10/1/2009 to 9/30/2010) PT $ 21,891 $ 16,710 Police Traffic Services (10/1/2010 to 9/30/2011) PT ,992 9,008 Total U.S. Department of Transportation 25,718 U.S. ENVIRONMENTAL PROTECTION AGENCY Direct Programs Brownfields Petroleum Substances Assessment n/a- 200,000 57,817 Brownfields Assessment and Cleanup Cooperative Agreements n/a- 1,000,000 7,509 Passed through the Michigan Department of Community Health Operator Certification Expense Reimbursement Grant n/a- N/A 219 Total U.S. Environmental Protection Agency 65,545 U.S.DEPARTMENT OF LABOR Passed through the Michigan Department of Energy, Labor and Economic Growth ARRA - Energy Efficiency and Conservation Block Grant BES , ,573 U. S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Passed through the Michigan Department of Community Health Bioterrorism - Supplemental - Regional EPI n/a- 10,000 10,000 Bioterrorism - Pandemic Flu n/a- 600, ,316 Bioterrorism - Supplemental n/a- 265, ,678 Bioterrorism - Vaccines (Non-cash Assistance) n/a- 105,210 38,410 Family Planning Project n/a- 55,797 55,797 Immunization and Vaccine Program n/a- 39,217 39,217 Immunization - Vaccines (Non-cash Assistance) n/a- 373, ,246 ARRA - Immunizations and Vaccines for Children n/a- 15,160 14,041 ARRA - Immunizations and Vaccines for Children - Vaccines (Non-cash Assistance) n/a- 66,775 66,271 Medical Assistance Program n/a- 208, ,650 Maternal and Child Health Services Block Grant n/a- 38,283 38,283 continued -SA7-

216 GRAND TRAVERSE COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (CONCLUDED) FOR THE YEAR ENDING DECEMBER 31, 2010 Pass Federal Grantor/Pass through Grantor/ through Award Program Title CFDA # Grantor # Amount Expenditures Passed through the Michigan Department of Human Services Title IV-D Incentive Payments CS/FOC n/a- $ 172,012 Title IV-D Reimbursement - Friend of the Court CS/FOC ,222, ,633 Title IV-D Reimbursement - Friend of the Court CS/FOC ,218, ,912 Title IV-D Reimbursement - Prosecutor CSPA ,180 65,847 Title IV-D Reimbursement - Prosecutor CSPA ,180 28,178 Title IV-E Reimbursement - Prosecutor PROFC ,633 24,924 Total U.S. Department of Health and Human Services 2,631,415 U.S DEPARTMENT OF HOMELAND SECURITY Passed through the Michigan Department of State Police Emergency Management Performance Grant n/a- 24,171 23, State Homeland Security Grant Program n/a- 3,853,822 5, State Homeland Security Grant Program (Non-cash Assistance) n/a- 134, ,218 Total U.S. Department of Homeland Security 163,177 Total Expenditures of Federal Awards $ 3,931,225 See notes to schedule of expenditures of federal awards. -SA8-

217 GRAND TRAVERSE COUNTY Notes to Schedule of Expenditures of Federal Awards For the Year Ended December 31, BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the schedule ) presents the activity of all federal awards programs of Grand Traverse County, Michigan (the County ). Federal awards received directly from federal agencies, as well as federal awards passed through other government agencies, are included on the schedule. The information in this schedule is presented in accordance with the requirements of OMB Circular A- 133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. The County s reporting entity is defined in Note I of the County s Comprehensive Annual Financial Report. The County s financial statements include the operations of the Grand Traverse County Road Commission discretely-presented component unit, which received federal awards that are not included in the Schedule for the year ended December 31, 2010, as this entity had a separate audit performed in accordance with OMB Circular A VACCINES (NON-CASH ASSISTANCE) As part of the County s comprehensive planning and budgeting contract (CPBC) with the Michigan Department of Community Health (MDCH), the County receives a certain amount of non-cash assistance in the form of vaccines. For the first time in the State fiscal year beginning October 1, 2009, the County received H1N1 vaccines under the bioterrorism program (CFDA No ) and ARRA vaccines under the immunizations program (CFDA No ). The County received a certain quantity of these vaccines during its fiscal year ending December 31, However, information on the valuation of these vaccines was not provided to the County was not provided until the end of the MDCH contract period (September 30, 2010). Therefore, certain amounts were excluded from the County s schedule of expenditures of federal awards for the year ended December 31, 2009, as follows: Type CFDA No. Amount ARRA Vaccines for Children (VFC) $ 504 H1N ,800 * * * * * $ 67,304 -SA9-

218 GRAND TRAVERSE COUNTY Schedule of Findings and Questioned Costs For the Year Ended December 31, 2010 SECTION I - SUMMARY OF AUDITORS RESULTS Financial Statements Type of auditors report issued: Unqualified Internal control over financial reporting: Material weakness(es) identified? x yes no Significant deficiency(ies) identified? x yes none reported Noncompliance material to financial statements noted? yes x no Federal Awards Internal Control over major programs: Material weakness(es) identified? yes x no Significant deficiency(ies) identified? x yes none reported Type of auditors report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with Circular A-133, Section 510(a)? x yes no Identification of major programs: CFDA Number Name of Federal Program or Cluster ARRA Energy Conservation Program Bioterrorism/H1N1 Grant / ARRA Immunization Grant Title IV-D Cooperative Reimbursement Program Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Auditee qualified as low-risk auditee? x yes no -SA10-

219 GRAND TRAVERSE COUNTY Schedule of Findings and Questioned Costs (Continued) For the Year Ended December 31, 2010 SECTION II FINANCIAL STATEMENT FINDINGS Finding Material Audit Adjustments Material Weakness in Internal Control over Financial Reporting Criteria. Management is responsible for maintaining its accounting records in accordance with generally accepted accounting principles (GAAP). Condition. During our audit, we identified and proposed certain adjustments, which were approved and posted by management, to adjust the County s general ledger to the appropriate balances. In our opinion, these adjustments were material to the County s financial statements. Cause. This condition was caused by various unrelated and decentralized oversights in the process of properly closing the County s books and records. Effect. As a result of this condition, the County s accounting records were initially misstated by amounts significant to the financial statements. In addition, the County was exposed to an increased risk that misstatements (whether caused by error or fraud) may occur and not be detected and corrected by management in a timely manner. Recommendation. The adjustments noted above have been reviewed by management, posted to the County s records, and are reported correctly in the audited financial statements. We understand that management has already began the process of implementing a formal accounts payable policy to clarify and improve the process in future years. View of Responsible Officials. Grand Traverse County management understands that it has the sole responsibility for maintaining its accounting records in accordance with generally accepted accounting principles (GAAP). The Finance Department will develop both a formal accounts payable process and related year-end closing procedures to ensure that transactions are properly recorded. -SA11-

220 GRAND TRAVERSE COUNTY Schedule of Findings and Questioned Costs (Continued) For the Year Ended December 31, 2010 SECTION II FINANCIAL STATEMENT FINDINGS (CONCLUDED) Finding Internal Controls over Payroll Transactions Significant Deficiency in Internal Control over Financial Reporting Criteria. Management is responsible for establishing internal controls over the recording, processing, and approving payroll transactions. This includes approval of employees timecards by a supervisor. Condition. During the audit, we noted instances in which employees were entering data on hours worked directly into the payroll system without review and approval by a supervisor. Cause. This condition was primarily caused by an oversight in establishing the initial software access rights for these individuals. This situation was detected internally by County management prior to the audit process. Effect. As a result of this condition, the County was exposed to a greater risk that an employee may falsify time records. Recommendation. As noted above, the County had already detected and corrected this condition prior to the audit. However, we recommend that management design procedures to minimize the likelihood of similar instances in the future. In addition, we recommend that management review existing access rights to determine whether additional employees are being allowed to directly input payroll information. View of Responsible Officials. As this condition was corrected prior to the audit, management will continue to review existing access rights to ensure that additional employees are not allowed to directly enter payroll information without the review and approval of a supervisor. -SA12-

221 GRAND TRAVERSE COUNTY Schedule of Findings and Questioned Costs (Continued) For the Year Ended December 31, 2010 SECTION III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding Internal Controls over Administration of Vaccines (Special Tests and Provisions) CFDA #93.268/ ARRA Immunization Grant Immaterial Noncompliance/Significant Deficiency in Internal Control over Compliance Criteria. Recipients of federal awards are responsible for compliance with various requirements in accordance with the OMB Circular A-133 Compliance Supplement and the award agreement. The immunizations grant requires that individuals receiving vaccines meet certain criteria, such as being of a certain age and income level. Each individual is then charged an administration fee based on a sliding fee scale. Condition. The County s Health Department administered 54 federally funded vaccines to patients that did not meet the criteria outlined in this Compliance Supplement and grant agreement. These patients were not charged an administration fee. Cause. The vaccine for the influenza virus is available in the form of an injection or in the form of a mist. The County only received a supply of the mist through this Federal program. This condition was a result of certain parents requesting for the mist to be provided to their child, even though the family was not income eligible. Effect. As a result of this condition, the County did not fully comply with all applicable compliance requirements. Questioned Costs. No costs were required to be questioned as a result of this finding, inasmuch as the value of federally funded vaccines administered to patients that did not qualify was less than $10,000. Recommendation. We recommend that the County ensure individuals administering federally funded vaccines are aware of all compliance requirements related to this program. View of Responsible Officials. This situation was brought about by the fact that there is injectable vaccine as well as a mist and certain parents were insistent that their child received the mist as opposed to the injectable vaccine. The county had not purchased any of the mist form of the vaccine for the flu season, so in the interest of vaccinating as many children as possible, the VFC mist product was administered when the parent was opposed to the injectable. For subsequent flu seasons, consideration will be given to ordering a small quantity of the mist vaccine or alternatively attempting to refer those not accepting the injectable product to an alternative provider so that they may be immunized. -SA13-

222 GRAND TRAVERSE COUNTY Schedule of Findings and Questioned Costs (Continued) For the Year Ended December 31, 2010 SECTION III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Finding Internal Controls over Suspended or Debarred Parties (Procurement, Suspension and Debarment) CFDA #93.268/ ARRA Immunization Grant Immaterial Noncompliance/Significant Deficiency in Internal Control over Compliance Criteria. A recipient of federal awards is required to determine that vendors being paid with federal funds are not suspended or debarred from doing business with the government. Such procedures are required whenever the amount disbursed to a single vendor in a given fiscal year is expected to be at least $25,000. Condition. The County does not currently have a process in place to determine whether the vendors being utilized for this grant are suspended or debarred. Cause: This condition was a result of a misunderstanding by management of the Federal compliance requirements in regards to suspension and debarment. Effect: As a result of this condition, the County was exposed to the risk that disbursements of federal awards would be made to vendors suspended or debarred by the federal government. Questioned Costs. No costs are required to be questioned as a result of this finding as none vendors involved were actually suspended or debarred. Recommendation: We recommend that the County begin checking the Excluding Party Listing Service website (EPLS.gov) on a quarterly basis for any vendor the County has done or intends to do business with in the amount of $25,000 or more (on an annual basis). As another option, the County can include suspension/debarment language in the contracts and agreements for the respective vendors. View of Responsible Officials. The County will include appropriate language in contracts with vendors and will review the Excluded Party Listing Service website on a quarterly basis and document the results from this point forward. -SA14-

223 GRAND TRAVERSE COUNTY Schedule of Findings and Questioned Costs (Continued) For the Year Ended December 31, 2010 SECTION III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Finding Documentation of Payroll Costs in Accordance with OMB Circular A-87 (Allowable Costs/Cost Principles) CFDA # Bioterrorism Grant CFDA # ARRA Immunization Grant Immaterial Noncompliance/Significant Deficiency in Internal Control over Compliance Criteria. Personnel charges to federal programs must be documented in accordance with OMB Circular A- 87, Attachment B, Item 8h. Condition. We noted certain instances in which personnel costs were charged to a Federal program but were not documented in accordance with Federal cost principles. In one instance, an employee was charged to a Federal grant that the related timesheet did not support. In another instance, an administrative employee was partially charged to a Federal program based on a budgeted time allocation. This employee did not prepare personnel activity reports to support the actual time and effort incurred. Finally, as noted at Finding , we noted instances in which employees were able to input time directly into the payroll system without being subject to the standard review and approval process. Cause. This condition was primarily caused by an oversight in a decentralized department in understanding the documentation requirements for personnel costs. Effect. As a result of this condition, the County did not fully comply with the documentation requirements applicable to personnel cost charged to these programs. Questioned Costs. No costs were questioned as a result of this finding, inasmuch as the projected error is less than $10,000. Recommendation: We recommend that the County ensure that all departments administering federal awards are provided the necessary training on Federal cost principles and the requirements of OMB Circular A-133. View of Responsible Officials. All Health Department payroll is reviewed by the Health Department Management Staff so any entries are subject to the standard review and approval process. All time applied to Federal Programs will be supported by a corresponding timesheet and verified by management staff. -SA15-

224 GRAND TRAVERSE COUNTY Schedule of Findings and Questioned Costs (Continued) For the Year Ended December 31, 2010 SECTION III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Finding Review and Approval of Financial Status Reports (Reporting) CFDA # Bioterrorism Grant CFDA # / ARRA Immunization Grant Significant Deficiency in Internal Control over Compliance Criteria. A recipient of federal awards is required to report periodically on grant expenditures in accordance with the OMB Circular A-133 Compliance Supplement and/or pass-through grantor agreement. The County s financial reports and reimbursement requests should be based on the County's official accounting records subjected to audit. Condition. Financial reports for grants administered through the health department are not independently reviewed and approved prior to submission. In addition, no supporting documentation is filed internally with the reports to document the source of the reported amounts (which may not agree at a future date if journal entries have been posted). Cause. This condition appears to be primarily the result of staffing constraints in this department, which operates in many aspects independent of the County finance department. Effect. As a result of this condition, the County was unable to produce paperwork to document that financial status reports agreed to the underlying accounting records, as they existed at the time of submission. In addition, the County was exposed to the risk that reports could contain errors that were not detected prior to submission to the grantor or pass-through agency. Questioned Costs. No costs are required to be questioned as a result of this finding as the financial status reports do not serve as the basis for reimbursement. Recommendation. We recommend that the County ensure that individuals administering federal grants are provided adequate training and resources in order to identify and comply with the significant number of complex requirements imposed by the federal government. View of Responsible Officials. As a process improvement to meet the changing requirements of quarterly reporting with the State, we are now recording these adjustments on a monthly basis to the accounting records. -SA16-

225 GRAND TRAVERSE COUNTY Schedule of Findings and Questioned Costs (Continued) For the Year Ended December 31, 2010 SECTION III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONCLUDED) Finding Timeliness of Reporting CFDA # Title IV-D Cooperative Reimbursement Program Immaterial Noncompliance Criteria. Recipients of federal awards are required to submit timely and accurate reports to the awarding agency in accordance with federal compliance requirements and/or pass-through agency agreements. Condition. While the County did, in fact, file all required reports for this program with the Michigan Department of Human Services, certain reports required under the provisions of the grant agreement were not filed by the stated due dates. Cause. This condition was caused by change in personnel at the third-party provider to which the County outsources the preparation of these reports. Effect. As a result of this condition, the County failed to fully comply with the reporting requirements of this program and was exposed to the risk that the grantor agency would refuse to honor the reimbursement request. Questioned Costs. No costs were questioned as a result of this condition as all reports were eventually submitted and reimbursement is expected to be received in full. Recommendation. We recommend that the County reiterate to its third-party provider the importance of having timely reports available. A management-level individual should be assigned the responsibility for monitoring the report due dates and ensuring that each report is submitted by the stated deadline. View of Responsible Officials. The County makes every effort to ensure the timely filing of required federal award reports. The County Finance Director will develop the necessary formal procedures, including a report filing schedule, to make sure we file timely and accurate reports with the awarding agency. -SA17-

226 GRAND TRAVERSE COUNTY Schedule of Findings and Questioned Costs (Concluded) For the Year Ended December 31, 2010 SECTION IV PRIOR YEAR FINDINGS No matters were reported in the prior year. * * * * * * -SA18-

227 Rehmann Robson 107 S. Cass St., Suite A Traverse City, MI Ph: Fx: June 30, 2011 To the Board of Commissioners Grand Traverse County Traverse City, Michigan We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Grand Traverse County (the County ) for the year ended December 31, 2010, and have issued our report thereon dated June 30, Professional standards require that we provide you with the following information related to our audit. Our Responsibility Under Auditing Standards Generally Accepted in the United States of America and OMB Circular A-133 As stated in our engagement letter dated March 15, 2011, our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your responsibilities. In planning and performing our audit, we considered the County s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide assurance on the internal control over financial reporting. We also considered 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. As part of obtaining reasonable assurance about whether the 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. Also, in accordance with OMB Circular A-133, we examined, on a test basis, evidence about the County s compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement applicable to each of its major federal programs for the purpose of expressing an opinion on the County s compliance

228 with those requirements. While our audit provides a reasonable basis for our opinion, it does not provide a legal determination on the County s compliance with those requirements. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our engagement letter and our meeting about planning matters on April 12, Significant Results from the Audit Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the County are described in Note I to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year. We noted no transactions entered into by the County during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Accounting estimates are an integral part of the financial statements prepared by management and are based on management s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: Management s estimate of the useful lives of depreciable capital assets is based on the length of time it is believed that those assets will provide some economic benefit in the future. Management s estimate of the accrued compensated absences is based on current hourly rates and policies regarding payment of sick and vacation banks. Management s estimate of the allowance for uncollectible receivable balances is based on past experience and future expectation for collection of various account balances. The assumptions used in the actuarial valuations of the Grand Traverse County Municipal Employees Retirement System pension plan, the Grand Traverse County Pavilions Municipal Employees Retirement System pension plan, and the Grand Traverse County Retiree Health Care Plan (other postemployment benefits) are based on historical trends and industry standards. Page 2

229 Page 3 We evaluated the key factors and assumptions used to develop these estimates in determining that they are reasonable in relation to the financial statements taken as a whole. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. The attached schedule summarizes uncorrected misstatements of the financial statements. Management has determined that their effects are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. In addition, we proposed certain material adjustments (which were reviewed by management and posted to the County s records) as described in the report on Single Audit Act compliance. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the attached management representation letter dated June 30, Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a second opinion on certain situations. If a consultation involves application of an accounting principle to the entity s financial statements or a determination of the type of auditor s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.

230 Page 4 Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. This information is intended solely for the use of management, the audit committee, the Board of Commissioners, others within the organization, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours,

231 Grand Traverse County Attachment A - Consideration of Internal Control Over Financial Reporting For the Year Ended December 31, 2010 In planning and performing our audit of the financial statements of Grand Traverse County (the County ) as of and for the year ended December 31, 2010, in accordance with auditing standards generally accepted in the United States of America, we considered the County s internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County s internal control. Accordingly, we do not express an opinion on the effectiveness of the County s internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be significant deficiencies or material weaknesses and, therefore, there can be no assurance that all such deficiencies have been identified. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. The deficiency we noted that we consider to be a material weakness are described in the Schedule of Findings and Questioned Costs in the County s report on Single Audit Act Compliance. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. The deficiencies we noted that we consider to be significant deficiencies are described in the Schedule of Findings and Questioned Costs in the County s report on Single Audit Act Compliance. Other Matters Review and Approval of Payroll Transactions The County currently has procedures in place to ensure that employees are being paid at the correct rate and for the actual number of hours worked. Since the process of inputting timesheet data into the payroll system requires manual entry, we recommend that the County implement an end control over payroll disbursements. This could be done by having an employee independent of payroll processing review a preliminary payroll register by employee, or by having the payroll system generate exception reports for data outside certain parameters. In all instances, any independent review and approval should be documented and retained as evidence of the control. A-1