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Notes

  1. 1. [NAME OF CEMETERY] [COUNTY NAME] COUNTY Revised June 2005 DELETE ALL HIGHLIGHTED TEXT search and replace: 20BB replace with beginning fiscal year 20EE replace with ending fiscal year TABLE OF CONTENTS TITLE PAGE Cover Letter................................................................................................................................................... Independent Accountants’ Report.................................................................................................................. Combined Statement of Cash Receipts, Cash Disbursements, and Changes in Fund Cash Balances - All Governmental and Fiduciary Fund Types - For the Year Ended December 31, 20EE.................................................................................................... Combined Statement of Cash Receipts, Cash Disbursements, and Changes in Fund Cash Balances - All Governmental and Fiduciary Fund Types - For the Year Ended December 31, 20BB.................................................................................................... Notes to the Financial Statements................................................................................................................. Independent Accountants’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Required by Government Auditing Standards.............................................................................................. Schedule of Findings (IF APPLICABLE)........................................................................................................ Schedule of Prior Audit Findings (IF APPLICABLE) .....................................................................................
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  3. 3. [ENTITY NAME] [COUNTY NAME] County [STREET ADDRESS] [CITY], Ohio [ZIP CODE] To the [GOVERNING BODY]: As you are aware, the Auditor of State’s Office (AOS) must modify the Independent Accountants’ Report we provide on your financial statements due to a February 2, 2005 interpretation from the American Institute of Certified Public Accountants (AICPA). While AOS does not legally require your government to prepare financial statements pursuant to Generally Accepted Accounting Principles (GAAP), the AICPA interpretation requires auditors to formally acknowledge that you did not prepare your financial statements in accordance with GAAP. Our Report includes an opinion relating to GAAP presentation and measurement requirements, but does not imply the amounts the statements present are misstated under the non-GAAP basis you follow. The AOS report also includes an opinion on the financial statements you prepared using the cash basis and financial statement format the AOS permits. Mary Taylor, CPA Auditor of State [REPORT DATE] 1
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  5. 5. INDEPENDENT ACCOUNTANTS’ REPORT [ENTITY NAME] [COUNTY NAME] County (Insert address - This is very important. The Clerk of the Bureau needs an exact mailing address.) To the [GOVERNING BODY]: We have audited the accompanying financial statements of [ENTITY NAME], [COUNTY NAME] County, 1 (the Cemetery) as of and for the years ended December 31, 2004 and 2003. These financial statements are the responsibility of the Cemetery’s management. Our responsibility is to express an opinion 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 the Comptroller General of the United States’ Government Auditing Standards. Those standards require that we plan and perform the audit to reasonably assure 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. [The Cemetery processes its financial transactions with the Auditor of State’s Uniform Accounting Network (UAN). Government Auditing Standards considers this service to impair the independence of the Auditor of State to audit the Cemetery because the Auditor of State designed, developed, implemented, and as requested, operates UAN. However, Government Auditing Standards permits the Auditor of State to audit and opine on this entity, because Ohio Revised Code § 117.101 requires the Auditor of State to provide UAN services, and Ohio Revised Code §§ 1 Insert, “, a component unit of [NAME OF PRIMARY GOVERNMENT],” if applicable. 3
  6. 6. 117.11(B) and 115.56 mandate the Auditor of State to audit Ohio governments. 2, 3] We believe our audit provides a reasonable basis for our opinion. As described more fully in Note 1, the Cemetery has prepared these financial statements using accounting practices the Auditor of State prescribes or permits. These practices differ from accounting principles generally accepted in the United States of America (GAAP). Although we cannot reasonably determine the effects on the financial statements of the variances between these regulatory accounting practices and GAAP, we presume they are material. Revisions to GAAP would require the Cemetery to reformat its financial statement presentation and make other changes effective for the year ended December 31, 2004. Instead of the combined funds the accompanying financial statements present for 2004 (and 2003),4 the revisions require presenting entity wide statements and also to present its larger (i.e. major) funds separately for 2004. While the Cemetery does not follow GAAP, generally accepted auditing standards requires us to include the following paragraph if the statements do not substantially conform to the new GAAP presentation requirements. The Auditor of State permits, but does not require governments to reformat their statements. The Cemetery has elected not to reformat its statements. Since this Cemetery does not use GAAP to measure financial statement amounts, the following paragraph does not imply the amounts reported are materially misstated under the accounting basis the Auditor of State permits. Our opinion on the fair presentation of the amounts reported pursuant to its non-GAAP basis is in the second following paragraph. In our opinion, because of the effects of the matter discussed in the preceding two paragraphs, the financial statements referred to above for the year ended December 31, 2004 do not present fairly, in 2 Because this is a “departure from the standard report” under AICPA guidance, modify the related GAGAS, and, if applicable, federal awards schedule reports as follows: We have audited the financial statements of [ENTITY NAME] (the Government) as of and for the year ended [FYE DATE], and have issued our report thereon dated [REPORT DATE] wherein we noted the Government followed accounting practices the Auditor of State prescribes rather than accounting principles generally accepted in the United States of America. We also noted the Government uses the Auditor of State’s Uniform Accounting Network (UAN) to process its financial transactions. Government Auditing Standards considers this service to impair the Auditor of State’s independence to audit the [ENTITY TYPE] because the Auditor of State designed, developed, implemented, and, as requested, operates UAN. 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 the Comptroller General of the United States’ Government Auditing Standards. 3 If AOS serves as financial supervisor, insert: The Auditor of State served during the year(s) ended [End of Year Audited] as the Government’s financial supervisor under Ohio Rev. Code §118.05 (G). Government Auditing Standards considers this service to impair the independence of the Auditor of State to the audit the Government because the Auditor of State may assume broad management powers, duties and functions under Ohio Rev. Code §118.04. However, Government Auditing Standards permits the Auditor of State to audit and opine on this entity, because Ohio Revised Code § 118.05 (G) requires the Auditor of State to provide these supervisory services, and Ohio Revised Code §§ 117.11(B) and 115.56 mandate the Auditor of State to audit Ohio governments. (Refer to this in the first paragraph of the GAGAS letter, too.) 4 The parenthesis refers to years not subject to GASB 34. You should include the parenthesis surrounding 2003. In future years, when these opinions cover only years subject to GASB 34, omit the parenthesis but still include all years the opinion covers. 4
  7. 7. conformity with accounting principles generally accepted in the United States of America, the financial position of the Cemetery as of [FYE DATE], or its changes in financial position for the year then ended. Also, in our opinion, the financial statements referred to above present fairly, in all material respects, the combined fund cash balances and reserves for encumbrances of [ENTITY NAME], [COUNTY NAME] County, as of December 31, 2004 and 2003, and its combined cash receipts and disbursements for the years then ended on the accounting basis Note 1 describes. The aforementioned revision to generally accepted accounting principles also requires the Cemetery to include Management’s Discussion and Analysis for the year ended December 31, 2004. The Cemetery has not presented Management’s Discussion and Analysis, which accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not required to be part of, the financial statements. In accordance with Government Auditing Standards, we have also issued our report dated [REPORT DATE], on our consideration of the Cemetery’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. While we did not opine on the internal control over financial reporting or on compliance, that report describes the scope of our testing of internal control over financial reporting and compliance, and the results of that testing. That report is an integral part of an audit performed in accordance with Government Auditing Standards. You should read it in conjunction with this report in assessing the results of our audit. Mary Taylor, CPA Auditor of State [REPORT DATE] 5
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  9. 9. WORD PROCESSOR WILL INSERT FINANCIAL STATEMENT HERE
  10. 10. WORD PROCESSOR WILL INSERT FINANCIAL STATEMENT HERE
  11. 11. [ENTITY NAME] [COUNTY NAME] COUNTY NOTES TO THE FINANCIAL STATEMENTS [FYE DATE] 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Description of the Entity (Modify as needed.) The constitution and laws of the State of Ohio establish the rights and privileges for the [Entity Name], [County Name] County, (the Cemetery) as a body corporate and politic. list subdivisions appointing members to the board: _____ appoint a three-member Board of Trustees to direct cemetery operations. Briefly describe significant financing received from these subdivisions. The following is an example: These entities also provide funding to meet the Cemetery’s operating costs under the agreement which established the Cemetery). The accompanying financial statements present this funding as Intergovernmental Receipts. The Cemetery provides grounds maintenance, opening and closing of graves, and the sale of grave lots. (delete the last item if the cemetery is no longer selling lots) The Cemetery’s management believes these financial statements present all activities for which the Cemetery is financially accountable. B. Basis of Accounting These financial statements follow the basis of accounting the Auditor of State prescribes or permits. This basis is similar to the cash receipts and disbursements basis of accounting. This basis recognizes receipts when received in cash rather than when earned, and recognizes disbursements when paid rather than when a liability is incurred. Budgetary presentations report budgetary expenditures when a commitment is made (i.e., when an encumbrance is approved). (Delete reference to budgetary presentation if note 1. E. and note 3 do not apply.) These statements include adequate disclosure of material matters, as the Auditor of State prescribes or permits. C. Cash and Investments The Cemetery includes investments as assets. The Cemetery does not report purchases of investments as disbursements or investment sales as receipts. The Cemetery recognizes gains or losses at the time of sale as receipts or disbursements, respectively. The Cemetery records certificates of deposit, U.S. Treasury Notes and common stock at cost or fair value when donated.<<DELETE IF NO DONATED INVESTMENTS. Money market mutual funds (including STAR Ohio) are recorded at share values the mutual fund reports. Modify this note as needed. Only describe investments actually held during the audit period. Equity securities (stock) are normally illegal, unless donated. Consult with the Legal Division if in doubt about an investment’s legality. Also, if equity securities have an impaired value deemed “other than temporary,” write them down to fair value. Consider consultation on the matter.) D. Fund Accounting The Cemetery uses fund accounting to segregate cash and investments that are restricted as to use. The Cemetery classifies its funds into the following types: (Delete all unnecessary fund types) 9
  12. 12. [ENTITY NAME] [COUNTY NAME] COUNTY NOTES TO THE FINANCIAL STATEMENTS [FYE DATE] (Continued) 1. General Fund The General Fund is the general operating fund. It presents all financial resources except those required to be accounted for in another fund. 2. Special Revenue Funds These funds present proceeds from specific sources (other than from trusts or for capital projects) restricted to expenditure for specific purposes. The Cemetery had the following significant Special Revenue Funds: (Include a one or two sentence description of any special revenue fund constituting at least 20% of combined special revenue disbursements or other funds deemed significant. The following is an example you must modify.) Perpetual Care Fund - This fund receives a portion of the receipts from all grave sales. The fund’s resources finance Cemetery maintenance costs after all grave lots have been sold. 3. Capital Project Funds These funds present receipts restricted to acquiring or constructing major capital projects (except those financed through trust funds). The Cemetery had the following significant Capital Project Funds: (Include a one or two sentence description of any capital project funds constituting at least 20% of combined capital project disbursements or other funds deemed significant.) 4. Fiduciary Funds (Trust and Agency Funds) These funds account for resources restricted by legally binding trust agreements and funds for which the Cemetery is acting in an agency capacity. The Cemetery had the following significant Fiduciary Funds: (Include a one or two sentence description of any fiduciary funds constituting at least 20% of combined fiduciary fund disbursements or other funds deemed significant. The following is an example that must be modified.) Rebove Memorial Fund and Wolstaff Memorial Fund - These funds receive interest from fund investments. Proceeds are used to maintain grave sites. E. Budgetary Process Note: A Union Cemetery established under ORC 759.27, and a Joint Township Cemetery established under ORC 517.14 are not taxing authorities and are not subject to ORC § 5705. A Union Cemetery District established under ORC 759.341 is a taxing authority and is subject to ORC § 5705. A cemetery receiving property taxes levied by another entity but not directly from the County Auditor in the form of a tax settlement, is likely not a Cemetery District. Cemetery Districts cannot use HB 262, regardless of whether they levy taxes. (For a Union Cemetery or Joint Township Cemetery, you should determine whether the Board has passed an appropriation measure, as Board appropriations do establish legal spending authority. Delete this note and note 3 if the Union or Joint Township Cemetery Board has not adopted an appropriation measure. The following is an example disclosure when the Union or
  13. 13. [ENTITY NAME] [COUNTY NAME] COUNTY NOTES TO THE FINANCIAL STATEMENTS [FYE DATE] (Continued) Joint Township Cemetery Board has passed an appropriation measure, but is not subject to § 5705:) The Cemetery’s Board budgets each fund annually. 1. Appropriations Budgetary expenditures (that is, disbursements and encumbrances) may not exceed appropriations at the fund, function or object level of control. (modify to reflect level of annual appropriation measure) The Board annually approves appropriation measures and subsequent amendments. Unencumbered appropriations lapse at year end. (Delete the word “unencumbered”, if a “non-5705" Cemetery’s budget policy does not require encumbering.) 2. Estimated Resources Estimated resources include estimates of cash to be received (budgeted receipts) plus unencumbered cash as of January 1. (Delete the word “unencumbered”, if a “non-5705" Cemetery’s budget policy does not require encumbering. Also modify to describe actual method of developing receipt budget, if different from this description.) 3. Encumbrances (Encumbrances would not be required for cemeteries not subject to § 5705, but a cemetery could choose to make encumbrances part of its budgetary process.) The Cemetery reserves (encumbers) appropriations when it makes commitments. Encumbrances outstanding at year end are carried over, and need not be reappropriated. (Replace the preceding sentence with the following only if encumbrances are canceled at year end.) Encumbrances outstanding at year end are canceled, and reappropriated in the subsequent year. A summary of 20EE and 20BB budgetary activity appears in Note 3. Even if a cemetery is not subject to § 5705, if they have adopted a resolution requiring budgeting, we should disclose any material noncompliance with the resolution here and in the GAGAS report. (The following is an example disclosure for a Union Cemetery District subject to § 5705.) The Ohio Revised Code requires the Board to budget each fund annually (except certain agency funds). delete the preceding parenthetical reference if there are no unbudgeted agency funds 1. Appropriations Budgetary expenditures (that is, disbursements and encumbrances) may not exceed appropriations at the fund, function or object level of control (modify to reflect legal level of control) and appropriations may not exceed estimated resources. The Board annually approves an appropriation measure and any subsequent amendments. The County Budget Commission must also approve the annual appropriation measure. Unencumbered appropriations lapse at year end.
  14. 14. [ENTITY NAME] [COUNTY NAME] COUNTY NOTES TO THE FINANCIAL STATEMENTS [FYE DATE] (Continued) 2. Estimated Resources Estimated resources include estimates of cash to be received (budgeted receipts) plus unencumbered cash as of January 1. The County Budget Commission must also approve estimated resources. 3. Encumbrances The Ohio Revised Code requires the Cemetery to reserve (encumber) appropriations when commitments are made. Encumbrances outstanding at year end are carried over, and need not be reappropriated. (Replace the preceding sentence with the following only if encumbrances are canceled at year end.) Encumbrances outstanding at year end are canceled, and reappropriated in the subsequent year. (Include, or modify the following sentences if you cited the Cemetery under § 5705.41(D). The Cemetery did not use the encumbrance method of accounting. [or] The Cemetery did not encumber all commitments required by Ohio law. Management has adjusted the accompanying financial statements and budgetary presentation to include material items that should have been encumbered. [See ADAM 95-01: If it is not practical to determine material unrecorded encumbrances, delete the preceding sentence, and include a qualification or scope restriction in the opinion regarding encumbrances.] A summary of 20EE and 20BB budgetary activity appears in Note 3. F. Property, Plant, and Equipment The financial statements report acquisitions of property, plant, and equipment as capital outlay disbursements when paid. The financial statements do not report these items as assets. G. Unpaid Vacation and Sick Leave (Delete if no employees are entitled to these benefits) Employees are entitled to cash payments for unused vacation and sick leave in certain circumstances, such as upon leaving employment. The financial statements do not report unpaid vacation and sick leave as liabilities. 2. EQUITY IN POOLED CASH AND INVESTMENTS The Cemetery maintains a cash and investments pool used by all funds. The Ohio Revised Code prescribes allowable deposits and investments. The carrying amount of cash and investments at December 31 follows:
  15. 15. [ENTITY NAME] [COUNTY NAME] COUNTY NOTES TO THE FINANCIAL STATEMENTS [FYE DATE] (Continued) 20EE 20BB Demand deposits Certificates of deposit Total deposits 0 0 U.S. Treasury Notes STAR Ohio Repurchase agreement Common stock (at cost, fair value was $XXXX and $ZZZZ at December 31, 20EE and 20BB, respectively.) Total investments 0 0 Total deposits and investments $0 $0 At December 31, 20EE, (Insert other time period noted, if any, or other ineligible investments, if any. Also, disclose as a material violation in the Compliance Report. Note that cemeteries may be allowed to hold equity securities, if required under a trust agreement. Check with our Legal Division.) the Cemetery held $XXX in equity securities. Equity securities are not eligible investments for the Cemetery under Ohio law. Deposits: Deposits are insured by the Federal Depository Insurance Corporation, [or] collateralized by securities specifically pledged by the financial institution to the Cemetery; (delete if there is no specific pledging) or collateralized by the financial institution’s public entity deposit pool. (delete if no pool is used) At December 31, 20EE, (Insert other time period noted. Also, disclose as a material violation in the Compliance Report.) $XXX of deposits were not insured or collateralized, contrary to Ohio law. Investments: (The following MUST be modified, based on the entity’s circumstances. It may be best to discuss the arrangement with a knowledgeable officer of the financial institution.) The Federal Reserve holds U.S. Treasury Notes in book-entry form, in the name of the Cemetery’s financial institution. The financial institution maintains records identifying the Cemetery as owner of these securities. Investments in STAR Ohio and mutual funds are not evidenced by securities that exist in physical or book-entry form. [The following three sentences describe some repurchase agreements / sweep accounts. However, circumstances may require modification to this disclosure. Also, not all sweep accounts are repurchase agreements. If ???] The Cemetery’s financial institution transfers securities to the Cemetery’s agent to collateralize repurchase agreements. The securities are not in the Cemetery’s name. [The following may describe some equity securities, but you should check with the broker-dealer or financial institution.] A financial institution’s trust department holds the Cemetery’s equity securities in book entry form in the Cemetery’s name. 3. BUDGETARY ACTIVITY (Delete if the entity is a Union Cemetery or Joint Cemetery (i.e., not subject to § 5705) and did not pass an appropriation measure). Budgetary activity for the years ending [End of Years Audited] follows:
  16. 16. [ENTITY NAME] [COUNTY NAME] COUNTY NOTES TO THE FINANCIAL STATEMENTS [FYE DATE] (Continued) 20EE Budgeted vs. Actual Receipts Budgeted Actual Fund Type Receipts Receipts Variance General $0 Special Revenue 0 Capital Projects 0 Fiduciary (Trust Funds) 0 Total $0 $0 $0 20EE Budgeted vs. Actual Budgetary Basis Expenditures Appropriation Budgetary Fund Type Authority Expenditures Variance General $0 Special Revenue 0 Capital Projects 0 Fiduciary (Trust Funds) 0 Total $0 $0 $0 20BB Budgeted vs. Actual Receipts Budgeted Actual Fund Type Receipts Receipts Variance General $0 Special Revenue 0 Capital Projects 0 Fiduciary (Trust Funds) 0 Total $0 $0 $0 20BB Budgeted vs. Actual Budgetary Basis Expenditures Appropriation Budgetary Fund Type Authority Expenditures Variance General $0 Special Revenue 0 Capital Projects 0 Fiduciary (Trust Funds) 0 Total $0 $0 $0 Disclose any material budgetary violations here and in the compliance report. The description should list the individual funds affected, not the fund types. The disclosures here should be brief, do not repeat the full text of the citation appearing in the GAGAS report. For example: Contrary to Ohio law, budgetary expenditures exceeded appropriation authority in the ABC fund by $4,598 for the year ended December 31, 20XX. Also contrary to Ohio law, at December 31, 20XX, the XYZ fund had a cash deficit balance of $14,509.
  17. 17. [ENTITY NAME] [COUNTY NAME] COUNTY NOTES TO THE FINANCIAL STATEMENTS [FYE DATE] (Continued) 4. PROPERTY TAX (Applies only to Cemetery Districts) Real property taxes become a lien on January 1 preceding the October 1 date for which rates are adopted by the Board. The State Board of Tax Equalization adjusts these rates for inflation. Property taxes are also reduced for applicable homestead and rollback deductions. The State pays Homestead and rollback amounts, reported in the accompanying financial statements as Intergovernmental Receipts. Payments are due to the County by December 31. If the property owner elects to make semiannual payment, the first half is due December 31. The second half payment is due the following June 20. Tangible personal property tax is assessed by the property owners, who must file a list of such property to the County by each April 30. The County is responsible for assessing property, and for billing, collecting, and distributing all property taxes on behalf of the Cemetery. 5. RETIREMENT SYSTEMS [Delete if no employees participate, for example if all are exempted part time employees.] The Cemetery’s employees belong to the Ohio Public Employees Retirement System (OPERS). OPERS is a cost-sharing, multiple-employer plan. The plan provides retirement benefits, including postretirement healthcare, and survivor and disability benefits to participants as the Ohio Revised Code prescribes. (Note: You must modify the contribution rates as applicable. ) The Ohio Revised Code also prescribes contribution rates. For 20EE and 20BB, OPERS employee members contributed 8.5 percent of their gross salaries. The Cemetery contributes an amount equal to 13.55 percent of participants’ gross salaries. The Cemetery has paid all contributions required through December 31, 20EE. (Most recent audit year). 6. RISK MANAGEMENT (Note: Use only the paragraphs that apply. Some of the descriptions below are mutually exclusive, so you must make appropriate modification.) Commercial Insurance The [Entity Name] has obtained commercial insurance for the following risks: • Comprehensive property and general liability; • Vehicles; and • Errors and omissions. The [Entity Name] is uninsured for the following risks: • Comprehensive property and general liability; • Vehicles; and • Errors and omissions. (Insert the following sentence if uninsured losses were material.) During 20EE, the [Entity Name] paid $XXX for losses that exceeded insurance coverage.
  18. 18. [ENTITY NAME] [COUNTY NAME] COUNTY NOTES TO THE FINANCIAL STATEMENTS [FYE DATE] (Continued) (Also disclose any significant changes in coverage from the prior year.) Risk Pool Membership The [Entity Name] is a member of the XYZ Joint Self Insurance Pool (the Pool). The Pool assumes the risk of loss up to the limits of the (name of subdivision’s) policy. The Pool may make supplemental assessments if the experience of the overall pool is unfavorable. [Modify the preceding sentence as needed.] The Pool covers the following risks: • General liability and casualty; • Public official’s liability; and • Vehicle. The Pool reported the following summary of assets and actuarially-measured liabilities available to pay those liabilities as of December 31: 20EE 20BB Cash and investments Actuarial liabilities Self Insurance The [Entity Name] is also self insured for [describe type of coverage, such as employee health or liability insurance]. The Self Insurance Fund pays covered claims to service providers, and recovers these costs from charges to other funds based on an actuarially determined cost per employee. [OR] Interfund rates are charged based on claims approved by the claims administrator. [OR] describe other method of cost recovery. A comparison of Self Insurance Fund cash and investments to the actuarially-measured liability as of December 31 follows: 20EE 20BB Cash and investments Actuarial liabilities Note 6 Comments from Bulletin 2001-05 1. This illustration applies to entities using the Auditor of State’s (i.e., cash) basis of accounting. GAAP-basis entities should follow the disclosure requirements described in GASB Statements 10 and 30. 2. As stated above, this illustration will always require considerable modification. For example, the illustration describes an entity that simultaneously has obtained commercial liability insurance, has no liability insurance, and has pooled its liability risk. Usually only one of these three conditions will apply. 3. The example also describes an entity that has joined a pool to insure liability risks and is self insured for health insurance. The opposite may apply, or some other combination may apply. 4. As illustrated in the second commercial insurance paragraph, we request that entities disclose if they elect to forego liability insurance. We would consider a subdivision to be uninsured when it has none of the following:
  19. 19. [ENTITY NAME] [COUNTY NAME] COUNTY NOTES TO THE FINANCIAL STATEMENTS [FYE DATE] (Continued) • Commercial insurance coverage • A self insurance fund • Fund equity reserve for self insurance under § 5705.13(A)(2) • Participates in a self insurance pool • Annual appropriations for claims costs reasonably sufficient to cover those costs. 5. There is no requirement to disclose a lack of health insurance coverage. Health insurance coverage is an employee benefit; failing to insure health coverage is a risk for employees, not a direct risk to a subdivision. Conversely, subdivisions should disclose if they have contractually agreed to cover employee health costs. Such costs are often significant and therefore of interest to financial statement readers. 6. The two-year comparison of cash and investments vs. actuarial-liabilities is a useful measurement of the adequacy of a subdivision’s funding methods / formulas. A significant excess of liabilities over assets or a trend showing a deteriorating excess of assets should warn management and financial statement users that current funding methods / formulas may require modification. In such instances, we would expect management to disclose plans to address the issue. We will not object if entities are unable to present data from years prior to December 31, 2000. We would accept a single year presentation. However, for years ending on or after December 31, 2001 we would expect two years of data in the presentation. 7. If the notes do not address management’s plans regarding a material deficiency, auditors should consider whether the disclosure is sufficient (see Auditing Standards Section AU 431). Auditors should also consider whether a going concern contingency exists (Auditing Standards Section AU 341). 8. While the Auditor of State believes all subdivisions with significant self-insurance commitments should have an actuary measure the liability annually, the Revised Code does not require this for all subdivisions or all types of insurance (see Appendix 2 from Bulletin 2001-05). If the Revised Code requires the measurement, but an entity elects not to comply, the entity would be unable to prepare the comparison of assets with actuarial liabilities, and auditors should consider (1) qualifying their opinions for an inadequate disclosure and (2) reporting a material noncompliance finding in the report on compliance and internal controls required by Government Auditing Standards. However, if the Revised Code does not require an entity to actuarially measure its liabilities, the lack of an actuarial disclosure would not affect auditors’ reports. The disclosure could still describe the funding methods. An entity should also disclose if it were unable to pay claims in a timely manner. 9. The auditor’s opinion encompasses the Note. The extent and nature of procedures is a matter of judgment based on risk, but might include the following: • Briefly read policies to support that coverage is current for commercial policies. • Perform the amended Chapter 6 procedures for the Ohio Compliance Supplement described in the Bulletin. • Compare the assets disclosed to similar assets in the audited financial statements. • Compare the last check written to a commercial carrier, to a pool, or to a third-party administrator to the invoice date to determine whether approved claims or premiums are paid reasonably currently. 7. CONTINGENT LIABILITIES
  20. 20. [ENTITY NAME] [COUNTY NAME] COUNTY NOTES TO THE FINANCIAL STATEMENTS [FYE DATE] (Continued) (Modify as needed. Briefly describe potentially material suits. Include the range of potential loss. However, avoid naming plaintiffs. Allow legal counsel to review your draft language before finalizing this report.) Example The Cemetery is defendant in several lawsuits. Although the outcome of these suits is not presently determinable, management believes that the resolution of these matters will not materially adversely affect the Cemetery’s financial condition. 8. RELATED PARTY TRANSACTIONS (Modify as needed. Check with the OCS, and if necessary, the Legal Division if any of such transactions indicate possible ethics or other violations.) Example: A Trustee is part owner of a company from which the Cemetery acquired (described acquisition briefly) during the year. The Cemetery paid $XXX for this acquisition. The Cemetery also uses office space donated by a Trustee. Significant* related party transactions must be disclosed. They may be indicative of ethics or other violations, but that is not the purpose of disclosing related party transactions. The concern with FASB 57 is that the nominal amount of a transaction not conducted at arms length may not be indicative of its true value. * A transaction may be “significant” when the dollar amount is immaterial, if it does not represent the fair value of the transaction. For example, a government may rent a facility to a related party for $1 per year. 9. SUBSEQUENT EVENTS (Describe material, uninsured losses, new tax levies or other material revenues or expenditures incurred subsequent to the financial statement date.)
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  22. 22. (NO REPORTABLE NONCOMPLIANCE OR INTERNAL CONTROL REPORTABLE CONDITIONS -- STAFF SHOULD SEE MOST RECENT INTRANET/BRIEFCASE VERSIONS. SOME REVISION MAY BE REQUIRED TO THIS VERSION OF THE REPORT.) INDEPENDENT ACCOUNTANTS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS REQUIRED BY GOVERNMENT AUDITING STANDARDS [ENTITY NAME] [COUNTY NAME] County (Insert address - This is very important. The Clerk of the Bureau needs an exact mailing address.) To the Board of Trustees: We have audited the financial statements of the [ENTITY NAME] (the Cemetery) as of and for the year ended [FYE DATE], and have issued our report thereon dated [REPORT DATE], wherein we noted the Cemetery followed accounting practices the Auditor of State prescribes rather than accounting principles generally accepted in the United States of America.5 We conducted our audit in accordance with auditing 5 If departing from the standard report on the financial statements (e.g., qualified or adverse opinions, disclaimer of opinion, and explanatory paragraphs addressing circumstances such as going concern uncertainties, accounting changes, reference to other auditors, etc.), the departure should be described in the first paragraph. For example, if the Cemetery uses UAN: We have audited the financial statements of [ENTITY NAME] (the Cemetery) as of and for the year ended [FYE DATE], and have issued our report thereon dated [REPORT DATE] wherein we noted that the Cemetery uses the Auditor of State’s Uniform Accounting Network (UAN) to process its financial transactions, and wherein we noted the Cemetery followed accounting practices the Auditor of State prescribes rather than accounting principles generally accepted in the United States of America. Government Auditing Standards considers this service to impair the Auditor of State’s independence to audit the [ENTITY TYPE] because the Auditor of State designed, developed, implemented, and, as requested, operates UAN. 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. If the opinion on an opinion unit is qualified due to a scope limitation, replace the first paragraph with the following: We have audited the financial statements of [ENTITY NAME] (the Cemetery) as of and for the year ended [FYE DATE], which and have issued our report thereon dated [REPORT DATE], wherein we noted the Cemetery followed accounting practices the Auditor of State prescribes rather than accounting principles generally accepted in the United States of America.. We qualified our report because [DESCRIBE REASON FOR QUALIFICATION]. Except as discussed in the preceding sentence, 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 the Comptroller General of the United States’ Government Auditing Standards. 20
  23. 23. standards generally accepted in the United States of America and the standards applicable to financial audits contained in the Comptroller General of the United States’ Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Cemetery’s internal control over financial reporting to determine our auditing procedures to express our opinion on the financial statements and not to opine on the internal control over financial reporting. Our consideration of the internal control would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts material to the financial statements we audited may occur and not be timely detected by employees when performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider material weaknesses. In a separate letter to the Cemetery’s management dated [REPORT DATE], we reported [an] other matter[s] involving internal control over financial reporting we did not deem [a] reportable condition[s].6 Compliance and Other Matters As part of reasonably assuring whether the Cemetery’s financial statements are free of material misstatement, we tested its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could directly and materially affect the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an If the opinion on an opinion unit is qualified because of an accounting principles departure, replace the first paragraph with the following: We have audited the financial statements of [ENTITY NAME] (the Cemetery) as of and for the year ended [FYE DATE], and have issued our report thereon dated [REPORT DATE], wherein we noted the Cemetery followed accounting practices the Auditor of State prescribes rather than accounting principles generally accepted in the United States of America.. We qualified our report because [DESCRIBE REASON FOR QUALIFICATION]. 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 the Comptroller General of the United States’ Government Auditing Standards. The 2003 Yellow Book clarifies that the auditor is required to report on internal control and compliance even in situations where they disclaim an opinion on the financial statements. If the report on the financial statements disclaims an opinion on an opinion unit, replace the first paragraph with the following: We were engaged to audit the financial statements of [ENTITY NAME] (the Cemetery) as of and for the year ended [FYE DATE], and have issued our report thereon dated [REPORT DATE], wherein we noted the Cemetery followed accounting practices the Auditor of State prescribes rather than accounting principles generally accepted in the United States of America.. We did not express an opinion on [DESCRIBE OPINION UNIT AFFECTED BY THE DISCLAIMER] because [DESCRIBE REASON FOR DISCLAIMER]. Except as discussed in the preceding sentence, we conducted our engagement in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in the Comptroller General of the United States’ Government Auditing Standards. Generally, the remaining boilerplate paragraphs are not affected. 6 If we do not issue a separate letter, omit this sentence. 21
  24. 24. objective of our audit and, accordingly, we do not express an opinion. The results of our tests disclosed no instances of noncompliance or other matters we must report under Government Auditing Standards. 7 In a separate letter to the Cemetery’s management dated [REPORT DATE], we reported [an] other matter[s] related to noncompliance we deemed immaterial.8 We intend this report solely for the information and use of the audit committee, management, [SPECIFY NAME OF LEGISLATIVE OR REGULATORY BODY], federal awarding agencies, and pass-through entities.9 It is not intended for anyone other than these specified parties. Mary Taylor, CPA Auditor of State [REPORT DATE] 7 The reference to Government Auditing Standards includes the general, fieldwork, and reporting standards for financial audits. 8 The Yellow Book requires us to communicate immaterial noncompliance and other matters involving internal control to management, preferably in writing. If written, the letter, such as a management letter, should be referenced when reporting on internal control and compliance. If we do not issue a separate letter, omit this sentence. 9 SAS Nos. 60 and 87 require the restriction on the use of the report. Though restricted in use, reports issued in connection with an audit of a local government may be a matter of public record. If the report is issued for an audit that is not subject to OMB Circular A-133, omit “federal awarding agencies and pass- though entities.” If the governmental unit does not have an audit committee, replace the reference to the audit committee with a reference to the group with equivalent authority. 22
  25. 25. [ENTITY NAME] [COUNTY NAME] COUNTY SCHEDULE OF FINDINGS [FYE DATE] FINDINGS RELATED TO THE FINANCIAL STATEMENTS REQUIRED TO BE REPORTED IN ACCORDANCE WITH GAGAS FINDING NUMBER 20EE-001 Noncompliance Citation OR Reportable Condition OR Material Weakness
  26. 26. [ENTITY NAME] [COUNTY NAME] County Schedule of Findings Page 2
  27. 27. [ENTITY NAME] [COUNTY NAME] COUNTY SCHEDULE OF PRIOR AUDIT FINDINGS [FYE DATE] Not Corrected, Partially Corrected; Significantly Different Corrective Action Finding Finding Fully Taken; or Finding No Longer Number Summary Corrected? Valid; Explain 10 11 10 Briefly describe the nature of the finding, such as “Revised Code § 5705.41(d), failure to encumber funds,” or “Inadequate segregation of duties.” ADAM 2001-10 requires us to use this schedule to report the status of prior GAGAS-level findings. 11 To add another row for additional prior year matters, place cursor in this cell and hit “tab.”

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