Examiners Update to County Administrators

1. Examiners Update to County Administrators Presented by: Teresa W. Durrett, CPA Director, County Audit Division Examiners of Public Accounts

2. Disclaimer • This information was presented to the Association of County Commissions of Alabama’s (ACCA) Annual Conference on May 17 , 2012. • This presentation represents the audit position of the Department of Examiners of Public Accounts as of that date.

3. Funding for EPA • We are in need of funding for our Department. • Bill currently in Legislature (SB489) would allow for us to charge for our audits.

4. Purchasing Cooperatives • Amendment to the Bid Law in the 2011 Legislative Session (Act No. 2011-530) • Allowed for County Commissions to purchase from approved contracts of national and regional purchasing cooperatives • EPA must approve prior to purchase • Our website contains information on the cooperatives which have been approved

5. Purchasing Cooperatives (cont) • When a County wants to purchase from a cooperative contract, the County should write a letter to the EPA and request that we review the contract. • Upon review and approval, the EPA will provide County a letter to document our approval, if not already approved and on our website.

6. GASB 54 Update • Need to identify all local laws concerning revenue and have them available for review • Need to have copies of resolutions and/or policies related to the following: • Significant percentage amounts • Order of expenditures (restricted, committed, assigned, unassigned), and • Who is allowed to make commitments and assignments of fund balance

7. GASB 54 (cont’d)Special Revenue Funds Pre-GASB 54 Definition GASB 54 Definition Special revenue funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. The term “proceeds of specific revenue sources” establishes that one or more specific restricted or committed revenues should be the foundation for a special revenue fund • To account for the proceeds of specific revenue sources (other than trusts for individuals, private organizations, or other governments or for major capital projects) that are legally restricted to expenditure for specified purposes

8. GASB 54 (cont’d)Special Revenue Funds • Substantial Portion Criteria – revenues that are restricted or committed should “continually” comprise a “substantial portion” of the special revenue fund inflows • Continually is based on expectation • Substantial is subjective • If a fund no longer meets this criteria, discontinue reporting of fund – combine with General Fund or other similar special revenue fund; Restate beginning fund balances

9. GASB 54 (cont’d)How to determine substantial portion Total Restricted + Committed Revenues Total Fund Inflows Does this percentage exceed the substantial portion percentage? Percentage has NOT been quantified by the GASB

10. GASB 54 (cont’d)Substantial Percentage • The Commission should pass a resolution establishing substantial percentage • We recommend 40%, with any percentage less than 40% the County will need to document the reasons as to why it is less • We also recommend waiting at least 3 years if the “substantial” portion changes significantly before reclassification of fund status • Example – If total substantial revenues go from 42 % to 27 % or vice versa, to allow for leveling out of fluctuations

11. GASB 54 (cont’d)Special Revenue Funds • There is NO requirement under GAAP to report restricted or committed revenues in a special revenue fund. • Must evaluate each special revenue fund to see if the total of restricted and committed revenues make up a substantial portion of the fund – if not, must report with General Fund or other appropriate governmental fund.

12. Minutes of Commission Meetings • Section 11-3-18, Code of Alabama, 1975 • The Chief Administrative Officer of the County shall “keep and record minutes of all meetings of the County Commission” • Local Governments Records Commission Guidelines: • The primary purpose of the minutes is to create a record of the Commission’s official actions

13. Minutes (cont’d) • All official actions or decisions should be clearly reflected in the minutes • While it may be necessary to record the meeting or make notes, neither the recording or notes are the official minutes • Official minutes should be a written document in which the decisions taken at the meeting are formally recorded

14. Minutes (cont’d) • The minutes become “official” after they have been formally approved at a subsequent meeting and signed by the appropriate officials • Signatures are required to authenticate the Commission’s approval of official actions • Any resolution, ordinance, petition, or report discussed or adopted should be attached to the minutes and become part of the official record

15. Minutes (cont’d) • Minutes should clearly indicate that a lawful quorum was present when the meeting convened • Minutes are the permanent, official record of the actions of the Commission • They should be stored under conditions that will ensure their long-term preservation

16. Immigration Law • The Code of Alabama 1975, Section 31-13-1 et.al. (Act 2011-535) • Beason-Hammon Alabama Taxpayer and Citizen Protection Act • Effective April 1, 2012, every business or employer in AL required to enroll in E-Verify; Follow Federal laws for verifying employment eligibility of newly hired employees using the E-Verify program.

17. Immigration Law (cont) • Effective January 1, 2012, every business or employer required to use E-Verify program for newly hired employees as a condition of contract, grant, or incentive awarded by a public entity. • Section 31-13-9(a) & (b) – affidavit & E-Verify • Section 31-13-25(b) – E-Verify • Boards must verify the immigration status of newly hired employees (including substitutes) using the E-Verify program.

18. OPEB Liability • For financial reporting purposes, an actuarial valuation should be performed to the following frequency: • For plans with a total membership of 200 or more – at least biennially • For plans with a total membership of fewer than 200 – at least triennially • There is an alternative measurement method for employers participating in plans with fewer than 100 members (see standards)

19. OPEB Liability (cont’d) • When a new actuarial valuation is performed, the actuary should calculate the net OPEB obligation • The employer’s net OPEB obligation comprises: • The OPEB liability (asset) at transition, if any, determined in accordance with paragraph 37 of GASB Statement 45

20. OPEB Liability (cont’d) • The cumulative difference since the effective date of Statement 45 between annual OPEB cost and the employer’s contributions, excluding: • Short-term differences • Unpaid contributions that have been converted to OPEB-related debt

21. OPEB Liability (cont’d) • When an employer has a net OPEB obligation, annual OPEB cost should be equal to: • The annual required contributions of the employer (ARC) • One year’s interest on the net OPEB obligation, and • An adjustment to the ARC

22. OPEB Liability (cont’d) • The interest should be calculated on the balance of the net OPEB obligation at the beginning of the year, using the investment return rate assumed in determining the ARC for that year • The adjustment to the ARC should be equal to the discounted present value (ordinary annuity) of the balance of the net OPEB obligation at the beginning of the year, using the same amortization methodology used in determining the ARC for that year

23. OPEB Liability (cont’d) • The adjustment applies only for that year; a new calculation should be made each year • The adjustment should be deducted from the ARC if the beginning balance of the net OPEB obligation is positive (cumulative annual OPEB cost is greater than cumulative employer contributions), or added to the ARC if net OPEB obligation is negative

24. New Officials/Commissioners • Bond Requirements for Various Officials (Act No. 2009-744) • Except as otherwise provided by law or Section 11-2-4, Code of Alabama, 1975, the premiums on all bonds of all county officials and employees shall be paid out of the general funds of the county

25. Bonds (cont’d) • The bond for a county official shall be filed no later than the day the official takes office • In the case of an appointment to an office, the bond should be filed within five working days of the date the appointment is made

26. Bonds (cont’d) • Section 11-2-20, Code of Alabama, 1975, states that “Except where otherwise specifically provided by law for county taxing officials and judges of probate, the bond for each county official shall be one-half of one percent of the amount budgeted in the then current county budget for activities conducted by or under the direction of the individual county official”

27. Bonds (cont’d) • The bond for any county official shall not exceed $50,000.00 • The bond for any county employee required to be bonded shall be set in an amount determined by the County Commission • The Commission can instead execute a blanket bond covering all county employees in an amount determined by the Commission to adequately protect all county funds and revenue

28. Capitalize or Expense? • Costs incurred during ownership consist of additions, improvements, alterations, rehabilitations, replacements, repairs, etc. • Repairs and maintenance should generally be expensed as incurred

29. Capitalize or Expense? (cont’d) • In general, costs should be capitalized when they: • Appreciably extend the life of an asset • Increase the capacity of the asset, or • Improve the efficiency or safety of the property • In some cases, the capitalization decision should be based on other factors, such as: • The size of the expenditure

30. Capitalize or Expense? (cont’d) • The property unit used, or • The length of the period to be benefited • If, for example, a new part will extend the life of a machine, it may still be expensed, if: • Its cost is small • The old part is depreciated as a part of the machine rather than separately, or • The part has a short life in relation to the life of the machine

31. Emergencies and Regular Bid Law • The Code of Alabama 1975, Section 16-13B-3 – Alabama Competitive Bid Law • Must affect public health, safety or convenience, be declared in writing by the awarding authority, and such action and reasons should be immediately made public by the awarding authority. • Contracts may be let to the extent necessary to meet the emergency without public advertisement per ruling by the State Supreme Court (General Electric Co vs. City of Mobile 1991)

32. Emergencies and Public Works • Code of Alabama 1975, Section 39-2-2 (e) • Must affect public health, safety, or convenience, as declared in writing by the awarding authority, setting forth the nature of the danger to the public health, safety, or convenience which would result from delay, contracts may be let to the extent necessary to meet the emergency without public advertisement. The action and the reasons for the action taken shall immediately be made public by the awarding authority upon request.

33. Public Works Law • Public Works Project – Definition • The construction, installation, repair, renovation, or maintenance of public buildings, structures, sewers, waterworks, roads, curbs, gutters, side walls, bridges, docks, underpasses, and viaducts as well as any other improvement to be constructed, installed, repaired, renovated, or maintained on public property and to be paid, in whole or in part, with public funds or with financing to be retired with public funds

34. Public Works Law • Public Works Project – Threshold • $50,000 • If a public works project is less than $50,000, does not have to be bid under the public works law or the regular competitive bid law. • However, a Commission can seek bids even if law does not require it!

35. Bid Files • Retain documentation in the bid file when items are purchased from state bid list • Print out information from state website at the time of purchase • Also, retain documentation in the bid file of joint bids • Obtain copy if the bid was prepared and awarded by another agency

36. Rejecting Bids • Section 41-16-27, Code of Alabama, 1975 • The awarding authority or requisitioning agency shall have the right to reject any bid if: • The price is deemed excessive, or • The quality of the product is inferior

37. 27 Pay Periods • Most fiscal years have 26 pay periods • Beware of fiscal years with 27! • Salaries must be divided by 27 instead of the routine 26…..if not, officials will be overpaid!

38. Federal Audit • A draft Schedule of Expenditures of Federal Awards (SEFA) prepared by commission staff would aid in the audit process • Most information needed to prepare the SEFA can be obtained from the grant agreement • CFDA numbers and correct titles for the federal programs can be obtained at www.cfda.gov

39. ADECA Surplus Property • Items purchased through ADECA’s surplus property division are shown on the SEFA as federal revenue • An entry should be made to record federal revenue as well as expenditures when items are purchased • This should also be added to your draft SEFA under CFDA # 39.003 – Donation of Federal Surplus Personal Property

40. Questions?