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Fiscal Year 2015MONROE COUNTY, FLORIDA REPORT ON SCHEDULE OF PASSENGER FACILITY CHARGES AND REPORTS ON COMPLIANCE AND INTERNAL CONTROL As of and for the Year Ended September 30, 2015 %, W4 MONROE COUNTY, FLORIDA TABLE OF CONTENTS Report of Independent Auditor 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 ........................................... 1 - 2 Report of Independent Auditor on Compliance with Requirements Applicable to the Passenger Facility Charge Program and on Internal Control over Compliance in Accordance with the Passenger Facility Charge Program Audit ------------------------------------------------ 3-4Guide - 4 Schedule of Findings and Questioned Costs Passenger Facility Charges-------------------------------------------------- 5-9 Schedule of Passenger Facility Charges and Note to Schedule-----------------------------------------------------------------.10 Schedule of Corrective Action Plan ------------------------------------------------------------------------------------------------------------ 11 Summary Schedule of Prior Year Findings .-------------------------------------------------------------------------------------------------12 on ` % Cherry Bekaert` so CFAs & Advisors Report of Independent Auditor 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 To the Honorable Mayor and Board of County Commissioners of Monroe County, Florida We have audited, in accordance with the 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, the financial statements of the governmental activities, the business - type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of Monroe County, Florida (the "County"), as of and for the year ended September 30, 2015, and the related notes to the financial statements, which collectively comprise the County's basic financial statements, and have issued our report thereon dated May 24, 2016 for the purpose of compliance with Section 281.39(2), Florida Statutes, and Chapter 10.550, Rules of the Auditor General -Local Government Entity Audits. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the County's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing opinions 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. 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 County's financial statements will not be prevented, or detected and corrected on a timely basis. 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. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We did identify certain deficiencies described in the accompanying schedule of findings and questioned costs as item 2015-001 and 2015-002 that we consider to be significant deficiencies. 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. County's Response to Findings The County's responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs - passenger facility charges. The County's responses were not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on them. Purpose of this Report This report is intended solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the County's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the County's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Q-s,,� '�4� �- I--V Orlando, Florida May 24, 2016 `� Cherry Bekaert` CPAs & Advisors Report of Independent Auditor on Compliance with Requirements Applicable to the Passenger Facility Charge Program and on Internal Control Over Compliance in Accordance With the Passenger Facility Charge Program Audit Guide To the Honorable Mayor and Board of County Commissioners of Monroe County, Florida Report on Compliance for the Passenger Facility Charge Program We have audited Monroe County, Florida (the "County") compliance with the types of compliance requirements described in the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration (the "Guide"), for its passenger facility charge program (the "Program") for the year ended September 30, 2015. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for the Program based on our audit of the types of compliance requirements referred to above. 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 the Guide. Those standards and the Guide 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 the 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 on compliance for the Program. However, our audit does not provide a legal determination of the County's compliance. Opinion on the Passenger Facility Charge Program In our opinion, the County complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on the Program for the year ended September 30, 2015. Report on Internal Control Over Compliance Management of the County is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the County's internal control over compliance with the types of requirements that could have a direct and material effect on the Program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance and to test and report on internal control over compliance in accordance with the Guide, 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 the 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 the Program will not be prevented, or detected and corrected, on a timely basis. 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 the 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. 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 material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Schedule of Passenger Facility Charges We have audited the financial statements of the governmental activities, the business type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the County, as of and for the year ended September 30, 2015, and the related notes to the financial statements, which collectively comprise the County's basic financial statements. We issued our report thereon dated May 24, 2016, which contained unmodified opinions on those financial statements. Our audit was performed for the purpose of forming opinions on the financial statements that collectively comprise the County's basic financial statements. The accompanying schedule of passenger facility charges is presented for purposes of additional analysis as required by the Guide and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of passenger facility charges is fairly stated in all material respects in relation to the basic financial statements as a whole. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Guide. Accordingly, this report is not suitable for any other purpose. Orlando, Florida May 24, 2016 MONROE COUNTY, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS PASSENGER FACILITY CHARGES YEAR ENDED SEPTEMBER 30, 2015 Section I. Summary of Auditor's Results Financial Statements Type of auditor's report issued: Unmodified Internal control over financial reporting: • Material weakness identified? _ yes X no • Significant deficiency identified that is not considered to be material weakness X yes _ none reported Noncompliance material to financial statements noted _ yes X no Passenger Facility Charges Internal control over passenger facility charges: ■ Material weakness identified? _ yes X no ■ Significant deficiency identified that is not considered to be material weakness _ yes X none reported Noncompliance material to passenger facility charges yes X no Does noncompliance warrant qualifying audit opinion for the major program? _ yes X no Nonmaterial noncompliance _ yes X no Type of auditor's report issued on compliance for passenger facility charges: Unmodified 5 MONROE COUNTY, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS PASSENGER FACILITY CHARGES YEAR ENDED SEPTEMBER 30, 2015 Section II. Financial Statement Findings Finding 2015-001 Significant Deficiency Training and Review Criteria: An effective system of internal control contemplates that management properly maintain and close the books and records to safeguard the accuracy of the financial statements. This includes ensuring that management has the availability and expertise to properly review, close and adjust the books and records in a timely manner to ensure accuracy. Condition: During our audit we noted that the majority of the Finance staff has been in place for the past fiscal year and that the majority of vacant positions from the prior year were filled. While this resulted in an improvement in the timeliness and accuracy of the accounting records, numerous entries were required to correct the books and records at year-end. Effect: Potential for financial statement error. Cause: There was a large volume of unique and complex transactions requiring significant management analysis and consultation and certain transaction recorded in error were either not detected through review processes or were recorded later than normally expected. Recommendation: We recommend that the Clerk ensure that the Finance staff continue to be developed in order to enhance expertise and availability for management oversight, providing additional assurance that books and records contain accurate and reliable financial information in a timely manner. Management Response: We will continue making significant improvements and will consult with external auditors on a routine basis regarding unique and complex transactions that require a significant amount of management analysis and consultation; especially those that take place during year-end. The unique and complex transactions for this year included: • Implementation of GASB 68 • Pension Presentation/Disclosures and delays by the State of Florida • Mayfield Money (proper technical presentation -- Grant vs. Loan) • Debt swap of $17 million between the BOCC and the Key Largo Wastewater Treatment District • Issuance of a $32 mil bond document and the covenants • Issuance of an associated $16 mil line of credit • Bankruptcy and treatment for uncollectible airport debt (had been on F/S for years) • Theft of County banking information (management worked closely with law enforcement, bank and county staff to resolve) • Changing of banking RFP process (July thru Oct was transition period) • Upgrade of the entire financial/accounting system (August and September) MONROE COUNTY, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS PASSENGER FACILITY CHARGES YEAR ENDED SEPTEMBER 30, 2015 Finding 2015-002 Significant Deficiency Late Postings and Payments Criteria: An effective system of internal control includes methods for insuring that transactions be recorded in a timely manner in order for the books and records to be accurate at any point in time as well as proper approval of all journal entries. Condition and context: During our testing of journal entries as well as procurement cards we noted that at times journal entries were posted late and at times the procurement card invoices were paid after the due date. In the majority of cases these late postings and late payments were due to the fact that the supporting documentation to support the transaction was not provided to Finance in a timely manner. Additionally we noted a small number of journal entries with no approval signature. Effect: Late posting of journal entries results in the books and records of the County to be less than accurate until the underlying transactions are posted and late payment of procurement card statements may result in the card being rendered unusable to the holder until payment is made. Lack of journal entry approval may result in incorrect postings. Cause: Lack of coordination between departments. Recommendation: We recommend that the County establish procedures to ensure that Finance be provided all documentation within a reasonable time frame to allow for the timely posting of journal entries and payment of procurement card invoices and that all journal entries are approved prior to posting. Management Response: In July 2014, the Clerk's Internal Audit Department issued "Audit Report of the Monroe County Board of County Commissioners Purchasing Card Policy and Procedures" that found procurement card (p-card) invoices were not submitted by Board of County Commissioner (BOCC) staff in a timely manner. In October 2015 the Clerk's Internal Audit Department conducted a follow-up and identified that the p-card invoices continue to not be paid timely due to late submission by BOCC staff. BOCC acknowledged to Internal Audit that the monthly invoices were not submitted timely. BOCC management indicated that they were willing to accept the risks associated with not paying the p-card invoices on time. It is recommended that BOCC management heed the recommendations of both the internal and external auditors for submitting the p-card invoices timely. The Clerk and BOCC staff worked tirelessly throughout the year to improve coordination and communication MONROE COUNTY, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS PASSENGER FACILITY CHARGES YEAR ENDED SEPTEMBER 30, 2015 In the majority of instances, the delays noted were due to outside factors that are beyond the control of BOCC and/or Clerk staff. Examples include: • Staff could not proceed without BOCC approval; • Staff could not proceed until court action on bond validation; • Staff could not proceed without input from third party grantor agencies; • Staff needed replies or feedback from other government agencies; • Contract execution must occur prior to posting. These external factors have always existed and will continue to exist. It is unreasonable to expect that these external factors will be eliminated. MONROE COUNTY, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS PASSENGER FACILITY CHARGES YEAR ENDED SEPTEMBER 30, 2015 Section III. Passenger Facility Charges Findings None reported. MONROE COUNTY, FLORIDA KEY WEST INTERNATIONAL AIRPORT SCHEDULE OF PASSENGER FACILITY CHARGES YEAR ENDED SEPTEMBER 30, 2015 Passenger facility charge receipts available for approved projects, beginning of year $ 4,180,595 Amounts collected and includible on quarterly reports 1,267,715 Investment income 4,001 Total passenger facility charge receipts available 5,452,311 Disbursement made (682,204) Passenger facility charge receipts available for approved projects, end of year $ 4,770,107 NOTE 1—BASIS OF PRESENTATION The accompanying Schedule was prepared for the purpose of complying with the Rules and Regulations of the Federal Aviation Administration relative to the Passenger Facility Charge Program and is not intended to be a complete presentation of the County's airport revenues, receipts, expenditures, or expenses. The accompanying Schedule was prepared on the modified cash basis of accounting. Passenger Facility Charge revenue is recorded when received rather than when earned and expenses are recorded when paid rather than when the obligation is incurred. Investments and investment income are recorded on the modified accrual basis and investments are valued at amortized cost. 10 MONROE COUNTY, FLORIDA SCHEDULE OF CORRECTIVE ACTION PLAN YEAR ENDED SEPTEMBER 30, 2015 Finding 2015-001 Name of contact person: Pam Radloff, Finance Director Corrective Action: See management's response in the finding. Proposed completion date: See management's response in the finding. Finding 2015-002 Name of contact person: Pam Radloff, Finance Director Corrective Action: See management's response in the finding. Proposed completion date: See management's response in the finding. 11 MONROE COUNTY, FLORIDA SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS YEAR ENDED SEPTEMBER 30, 2015 Finding 2014-001 Status: Not corrected. See current year finding 2015-001 above. Finding 2014-002 Status: Corrected Finding 2014-003 Status: Corrected 12