Independent Auditors’ Management Letter Essay

To the Honorable maturate of County Commissioners of Lee County, Florida We nurture audited the financial statements of the governmental activities, the business-type activities, from each one major stock certificate, and the aggregate remaining fund reading of Lee County, Florida (the County) as of and for the socio-economic class ended September 30, 2011, and have issued our taradiddle thereon dated March 8, 2012. We mannered our audit in accordance with auditing standards in general accepted in the United renders 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 anesthetic Governments, and NonProfit Organizations. We have issued our strong-minded tenders Report on Internal authorisation over Financial Reporting and on Compliance and Other Matters establish on an Audit of Financial Statements Performed in Accordance wi th Government Auditing Standards, Independent Auditors Report on Compliance with Requirements that Could Have a Direct and textile result on Each Major Federal Awards Program and State Financial Assistance Project and on Internal Control everywhere Compliance, and Schedule of Findings and Questioned Costs.Disclosures in those studys and schedule, which argon dated March 8, 2012, should be considered in conjunction with this centering letter. Addition eachy, our audit was conducted in accordance with Chapter 10.550, Rules of the Auditor General, which governs the conduct of local governmental entity audits performed in the State of Florida. This letter admits the following training, which is non include in the aforementioned auditors themes or schedule. Section 10.554(1)(i)1., Rules of the Auditor General, requires that we modulate whether or non corrective actions have been taken to address findings and adviseations make in the preceding annual financial audit incubate . There were no findings and recommendations made in the preceding annual financial audit report with respect to the Board of County Commissioners (the Board).With respect to the Clerk of the Circuit Court, situation Appraiser, Sheriff, Supervisor of Elections, and Tax Collector (collectively the County agencies), reference to whether corrective actions have been taken is provided in crock up management letters for each County agency. Section 10.554(1)(i)2., Rules of the Auditor General, requires our audit to include a canvass of the provisions of Section 218.415, Florida Statutes, regarding the coronation funds of public funds. In connection with our audit of the financial statements of the County, nonhing came to our help that would cause us to believe that the County was in non conformation with Section 218.415 regarding the investment of public funds. Section 10.554(1)(i)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit of the Board, we did not have any such findings. Reference to such matters is provided in disperse letters for each County agency, where applicable.Section 10.554(1)(i)4., Rules of the Auditor General, requires that we address violations of provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an sum on the financial statements that is less than material just now much than inconsequential. In connection with our audit, we did not have any findings different than those reported in the Schedule of Findings and Questioned Costs. Section 10.554(1)(i)5., Rules of the Auditor General, provides that the auditor may, base on professional judgment, report the following matters that have an inconsequential heart on financial statements, considering both quantitative and qualitative factors (1) violations of provisions of contracts or grant agreements, fraud, ill egal acts, or abuse, and (2) deficiencies in internal control that are not significant deficiencies. Reference to such matters is provided in Appendix A for the Board.We did not audit the responses to our recommendations, which are also provided in Appendix A, and, accordingly, we carry no opinion on them. Reference to such matters is provided in separate management letters for each County agency, where applicable. Section 10.554(1)(i)6., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in the management letter, unless disclosed in the notes to the financial statements. Such disclosure is include in the notes to the financial statements. Section 10.554(1)(i)7.a., Rules of the Auditor General, requires a statement be included as to whether or not the local governmental entity has met one or more of the conditions described in Section 218.503(1), Florida S tatutes, and identification of the specific condition(s) met.In connection with our audit of the financial statements of the County, the results of our tests did not indicate the County met any of the stipulate conditions of a financial emergency contained in Section 218.503(1). However, our audit does not provide a legal determination on the Countys compliance with this requirement. Section 10.554(1)(i)7.b., Rules of the Auditor General, requires that we determine whether the annual financial report for the County for the financial year ended September 30, 2011, filed with the Florida De come outment of Financial Services pursuant(predicate) to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, 2011.Our comparison of the financial report filed with the Florida Department of Financial Services to the Countys 2011 audited financial statements resulted in no material differences. Pursuant to Sections 10.554(1)(i)7.c. and 10.556(7), Rules of the Auditor General, we applied financial condition sagaciousness procedures as of September 30, 2011. It is managements responsibility to monitor the Countys financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. This letter is intended solely for the information and use of management, the Board of County Commissioners of Lee County, Florida, the Florida Auditor General and applicable federal and state agencies, and is not intended to be and should not be used by anyone otherwise than these specified parties.Orlando, Florida March 8, 2012LEE COUNTY, FLORIDA Appendix A heed garner Comments For the fiscal year ended September 30, 2011 Observation 2011-A Statement of checker The Clerks Finance and Records Department periodically reviews eddy in come on with the County departments to determine which barfs should be capi talized and depreciated. However, we state during our audit that the governmental activities construction in onward motion balance at September 30, 2011 included reliable projects that had been unadulteratedd or abandoned before year-end. Criteria Construction in progress projects should be reclassified to depreciable assets once substantially completed and ready(prenominal) for service. If the County determines a project is no longer viable, the construction in progress should be set downd. Effect of condition Construction in progress for governmental activities in the substance of $8,061,000 was not reclassified as depreciable assets at September 30, 2011, and colligate depreciation expense and accumulated depreciation were not enter.In addition, the County expensed $1,242,000 of construction in progress for a project that was abandoned. lay down of condition The process in countersink for notification of when construction in progress is substantially complete and avail able for service or when projects are no longer viable, was not fit to identify such projects for proper recording. Recommendation We recommend that County departments be more diligent in reviewing the status of construction in progress and herald the Clerks Finance and Records Department when projects are substantially complete and available for service or when they determine a project should be abandoned. Managements response We have asked our external auditors to provide information to the Boards fiscal personnel on this matter, including the importance of capitalizing or writing off construction in progress in a timely manner.Observation 2011-BStatement of Condition The cost of evoke think to borrowings on construction in progress had not been sufficiently capitalized preliminary to audit review. Criteria Accounting principles state that engross shall be capitalized for assets in opening move funds that are constructed for the enterprises own use if the effect of expensi ng such interest is material. Effect of condition Capitalized interest cost related to construction in progress was recalculated and recorded in the sum total of somewhat $1 million.Cause of condition The calculation of capitalized interest had not included all construction in progress on which interest was to be capitalized. Recommendation We recommend that the Clerks Finance and Records Department review construction in progress annually and determine the amount of interest that should be capitalized. Managements response The issue was related to accruing interest for construction in progress based on the total amount of construction in progress rather than the amount that was capitalized in the new year. This has been corrected.LEE COUNTY, FLORIDA Appendix A Management Letter Comments For the fiscal year ended September 30, 2011 Observation 2011-C Statement of Condition During our testing of immediate payment management compliance for the Emergency Operations Center State gr ant, it was noted that $138,000 of expenditures, out of $849,000 in total, were not requested for reimbursement in the annual reimbursement request. Criteria Reimbursements requests should include all expenditures for which the County has disbursed payment to vendors for the specific time period.Effect of Condition Reimbursement for accepted invoices was not requested and the County did not receive all of the monies to which it was entitled in a timely manner, which could result in cash flow issues for the program. Cause of Condition The County did not reconcile the reimbursement request to the chronicle records. Recommendation We recommend that management establish a process to reconcile to the accounting records when preparing reimbursement requests. Managements reply Future requests for reimbursement will be made in the same year that they were expended.Observation 2011-DStatement of Condition The Countys employment has been to write off uncollectable EMS receivables as faul ty debt expenditures. Criteria Discounts and allowances in revenue-related governmental fund accounts should be recorded as revenue reductions, rather than as bad debt expenditures. Effect of Condition EMS revenues and bad debt expenditures were overstated by $6,106,000. This also created a financial statement budget variance because bad debt expenditures have been recorded but not budgeted. Cause of Condition The long-standing County practice has been to record all uncollectable receivables as bad debt expenditures. Recommendation We recommend that management modify accounting practices to reduce revenue for uncollectable revenue-related governmental fund accounts receivable. Managements Response We will look at this issue in the upcoming fiscal year and handle it appropriately.