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FINANCIAL STATEMENTS JUNE 30, 2011 Includes Independent Auditor’s Report Issued By Office of the Oklahoma State Auditor and Inspector Table of Contents June 30, 2011 Page INDEPENDENT AUDITOR’S REPORT 1-2 STATEMENTS Statements of Net Assets 3 Statements of Revenues, Expenses and Changes in Net Assets 4 Statements of Cash Flows 5 Notes to Financial Statements 6 REPORT ON INTERNAL CONTROL OVER FINANICAL REPORTING AND ON COMPLINACE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCEWITH GOVERNMENT AUDITING STANDARDS 12-13 1401 Health Center Parkway, Yukon, Oklahoma 73099 827 NW 63rd, Suite 202, Oklahoma City, Oklahoma 73116 Phone (405) 848-7797 Fax (405) 848-7840 Web address www.hbc-cpas.com INDEPENDENT AUDITOR’S REPORT State of Oklahoma Office of the Oklahoma State Auditor and Inspector Oklahoma City, Oklahoma We have audited the accompanying financial statements of Office of the Oklahoma State Auditor and Inspector (the “Office”), a component unit of the State of Oklahoma, as of and for the year ended June 30, 2011 as listed in the table of contents, which collectively comprise the financial statements of the reporting entity the Office of the Oklahoma State Auditor and Inspector. These financial statements are the responsibility of the Office of the Oklahoma State Auditor and Inspector’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 audit contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of Office of the Oklahoma State Auditor and Inspector as of June 30, 2011 and the respective changes in net assets and cash flows thereof, for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated October 31, 2011 on our consideration of the Office’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and is important in assessing the results of our audit. 1 Alan Behrens, CPA Lonnie Heim, CPA Marty Chisum, CPA, CFE _______________ Natalie Heim Barnes, CPA 1401 Health Center Parkway, Yukon, Oklahoma 73099 827 NW 63rd, Suite 202, Oklahoma City, Oklahoma 73116 Phone (405) 848-7797 Fax (405) 848-7840 Web address www.hbc-cpas.com The Office has not presented management’s discussion and analysis. Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Oklahoma City, Oklahoma October 31, 2011 2 OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR STATEMENT OF NET ASSETS JUNE 30, 2011 ASSETS Current assets: Cash $835,091 Cash-restricted 27,507 Due from federal government 55,955 Accounts receivable, net of allowance of $563,807 680,001 Total current assets 1,598,554 Noncurrent assets: Notes receivable 42,012 Capital assets, net of accumulated depreciation of $3,553 9,632 Total noncurrent assets 51,644 Total assets 1,650,198 LIABILITIES Current liabilities: Accounts payable 172,158 Accrued wages payable 15,522 Compensated absences-payable within one year 422,973 Total current liabilities 610,653 Noncurrent liabilities: Compensated absences-payable after one year 58,296 Total noncurrent liabilities 58,296 Total liabilities 668,949 NET ASSETS Restricted for OSU 27,507 Invested in capital assets 9,632 Unrestricted 944,110 Total net assets $981,249 The notes to the financial statements are an integral part of this statement. 3 OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEAR ENDED JUNE 30, 2011 Operating revenues: Filing fees $ 161,090 Audit fees 4,489,851 Other fees 79,800 Total operating revenues 4,730,741 Operating expenses: Personal services 8,860,910 Travel 94,248 Administrative 578,713 Equipment 168,174 Depreciation 1,877 Total operating expenses 9,703,922 Operating income (loss) (4,973,181) Nonoperating revenues (expenses): Appropriations 5,152,672 ARRA awards 300,000 Pass-through OSU expenses (330,086) Total nonoperating revenue (expenses) 5,122,586 Change in net assets 149,405 Total net assets - beginning 831,844 Total net assets - ending $ 981,249 The notes to the financial statements are an integral part of this statement. 4 OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2011 CASH FLOWS FROM OPERATING ACTIVITIES Receipt of filing fees $161,090 Receipt of audit fees 4,368,181 Receipt of other fees 76,470 Payments for personal services (8,803,411) Payments for travel (94,460) Payments for administrative (572,843) Payments for equipment (124,493) Net cash provided (used) by operating activities (4,989,466) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Receipt of appropriations 5,152,672 Receipt of ARRA award 300,000 Pass-through payments to OSU (330,479) Net cash provided (used) by noncaptial financing activities 5,122,193 Net increase in cash 132,727 Cash July 1, 2010 729,871 Cash June 30, 2011 (including $27,507 reported in restricted cash) $ 862,598 Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (4,973,181) Adjustments to reconcile operating income to net cash provided (used) by operating activities: (Increase) decrease in due from federal government 9,156 (Increase) decrease in accounts receivable (92,145) (Increase) decrease in notes receivable (42,012) (Increase) decrease in capital assets (5,722) Increase (decrease) in accounts payable 56,198 Increase (decrease) in accrued wages payable 15,522 Increase (decrease) in compensated absences payable in one year 42,068 Increase (decrease) in compensated absences payable after one year 650 Total adjustments (16,285) Net cash provided by operating activities $ (4,989,466) The notes to the financial statements are an integral part of this statement. 5 OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR FINANCIAL REPORT AS OF AND FOR THE YEAR ENDED JUNE 30, 2011 6 The basic financial statements of the Oklahoma State Auditor and Inspector (the Office) have been prepared in conformity with the accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the Office’s accounting policies are described below. Notes to the Basic Financial Statements Note 1. Summary of Significant Accounting Policies A. Reporting Entity The Constitution of the State of Oklahoma provides under Article VI, Section 19 for a State Auditor and Inspector. Prior to 1979, the State maintained a separate Office of the State Auditor and the Office of the State Examiner and Inspector. However, effective January 8, 1979, a constitutional amendment merged the Office of the State Auditor and the Office of the State Examiner and Inspector, creating the Office of the Oklahoma State Auditor and Inspector (the Office). The Office is a part of the primary government (State of Oklahoma), and its financial data are included in the State’s Comprehensive Annual Financial Report. The accompanying financial statements are intended to present the financial position and results of operations of only that portion of the State of Oklahoma that is attributable to the Office. The Office has the following primary duties as specified in the Constitution and Statutes of Oklahoma, as well as other duties not listed here: Examine the State Treasurer’s and all county treasurers’ books and records; Examine the books and records of state agencies, boards, and commissions; Maintain copies of audit reports of public trusts; Maintain a repository for audits and budgets filed by counties, school districts, and towns; Provide fiscal support for the Pension Commission; Provide fiscal support for the Board of Equalization. The Office is funded by the Legislature of the State of Oklahoma (the Legislature) through appropriations to perform certain of its constitutional and statutory functions and by various fees charged, such as those for auditing and filing audit reports. OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR FINANCIAL REPORT AS OF AND FOR THE YEAR ENDED JUNE 30, 2011 7 B. Basis of Presentation and Accounting The Office accounts for its activities within a proprietary fund type. The Office’s activities meet the definition of an enterprise fund because it is the intent of the Agency to recover, primarily through user charges, the cost of providing goods or services to the general public. The proprietary fund type is accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of this fund are included on the statement of net assets. Proprietary fund operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in net total assets. The accrual basis of accounting is utilized by the proprietary fund. Under this basis of accounting, revenues are recognized when earned and expenses are recognized when the liability is incurred. As required by the GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the Office has elected to apply all applicable GASB pronouncements and does not apply Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or after November 30, 1989. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services in connection with a proprietary fund’s principal ongoing operations. Revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. C. Assets, Liabilities, and Equity Cash All cash balances are held by the Oklahoma Office of the State Treasurer. The Office’s cash is pooled with the cash of all other state agencies; this pool of cash is deposited in banks or invested by the State Treasurer in accordance with Oklahoma Statutes. The State Treasurer requires that financial institutions deposit collateral securities to secure the deposits of the State in each such institution. The Office, for the purposes of reporting cash flows, considers cash equivalents to include all highly liquid investments with an original maturity of three months or less. Capital Assets The Department of Central Services, in accordance with Oklahoma Statutes, Title 74 § 110.1, has primary responsibility to maintain control of all property and equipment owned by the State of Oklahoma with a cost in excess of $500. The Department of Central Services has delegated to each of the various state agencies the responsibility to maintain the accounting records for property and equipment purchased and used by each agency. Capital assets are defined, by the Office, as assets that have a cost in excess of $5,000 at the date of acquisition. OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR FINANCIAL REPORT AS OF AND FOR THE YEAR ENDED JUNE 30, 2011 8 Compensated Absences Employees earn annual leave at the average rate of 10 hours per month for up to 5 years service, an average of 12 hours per month for 5 to 10 years, an average of 13.33 hours per month for 10 to 20 years, and an average of 16.67 hours per month for over 20 years of service. Employees with up to 5 years service may accumulate to a maximum of 240 hours and employees with over five years service may accumulate to a maximum of 480 hours. Accounts Payable Accounts payable include all unpaid charges for services or goods incurred on or before June 30. These payables represent amounts incurred in the ordinary course of business and are primarily owed to vendors. Wages Payable Wages Payable consists of all wages earned prior to June 30th that were not paid by June 30th. Income Taxes The Office, as an integral part of the State, is exempt from federal and state income taxes. Cash and Net Assets – Restricted Each year, the Legislature appropriates funds to the Office to be paid to Oklahoma State University (OSU) for the County Training Program, administered by the Commission on County Government Personnel Education and Training, mandated by 19 O.S., §130.1 et seq. The Office has no administrative duties related to this program. The Legislature appropriated $330,086 for this program in fiscal year 2011. These funds are legally restricted; therefore, the balance remaining at June 30, 2011 have been shown as restricted cash and restricted net assets on the Statement of Net Assets. Accounts Receivable Accounts receivable consist of amounts due from state agencies, counties, school districts, cities, ambulance services, and various quasi-governmental entities in the State for audit services rendered by the Office. The amount presented is net of the allowance for doubtful accounts of $563, 807 for fiscal year 2011. The allowance for doubtful accounts consists of accounts outstanding for more than 120 days. The policy of the Office is to bill for the audit services rendered while the audit is in progress. Bills are submitted approximately once per month during the progression of the audit, with a final billing at completion. Notes Receivable Notes receivable consist of collectible accounts receivable that are not expected to be fully collected within one year. OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR FINANCIAL REPORT AS OF AND FOR THE YEAR ENDED JUNE 30, 2011 9 Due from Federal Government The Office is under contract with the Federal Department of the Interior to perform audits and related investigations of federal oil and gas leases located in Oklahoma in accordance with section 205 of the Federal Oil and Gas Royalty Act. The amounts presented are reimbursements receivable for work performed during May and June of fiscal year 2011. Personal Services Personal Services consists of all payroll and related costs (including regular and part-time salaries, longevity payments, retirement, and group insurance premiums), as well as payments for professional services (such as auditing fees, data processing services, and various other general services). Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. Note 2. Capital Assets The Office reports capital assets at cost, net of accumulated depreciation. Capital assets are defined as assets with initial costs of $5,000 or more and an expected useful life of five years or more. Depreciation is computed on the straight-line method over the estimated useful lives: Computer equipment 5 years Furniture and equipment 10 years A half year’s depreciation is taken in the year an asset is placed in service. When assets are disposed of, depreciation is removed from the respective accounts and the resulting gain or loss, if any, is recorded. Capital asset activity for the year ended June 30, 2011 was as follows: Accumulated Capital Equipment Depreciation Assets(net) Beginning balance $ 5,586 $ (1,676) $ 3,910 Increases 7,599 (1,877) 5,722 Decreases - - - Ending balance $ 13,185 $ (3,553) $ 9,632 OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR FINANCIAL REPORT AS OF AND FOR THE YEAR ENDED JUNE 30, 2011 10 Note 3. Operating Leases The Office leases certain office space and equipment which meet the criteria for operating leases. Total costs of such leases were approximately $401,337 for fiscal year 2011. The future minimum lease payments for these leases are as follows: 2012 $ 163,063 2013 19,367 2014 6,347 2015 _ 2016 _ Total $ 188,777 Note 4. Risk Management As part of the State of Oklahoma primary government, the Office’s risk of losses to which they are exposed is managed through the State’s risk management activities. The Office is subject to risks of loss from tort claims, property loss, health claims, and workers’ compensation claims. In general, the State is self insured for health care claims, workers’ compensation claims, tort claims, and property losses. These services are provided by the certain departments of the State’s General Fund and two state component units. The Office is at no financial risk of loss from these types of risks. Note 5. Pension Plan Participation The Office contributes to the Oklahoma Public Employees Retirement System (OPERS) plan. The OPERS is a statewide cost-sharing multiemployer defined benefit retirement plan. A separately issued annual report for OPERS may be obtained from the Public Employees Retirement System, 5801 N. Broadway Extension, Suite 400, Oklahoma City, 73118-7484. The plan provides retirement, disability, and death benefits to plan members and their beneficiaries. The pension benefit provisions are established and amended by the State Legislature. Cost-of-living adjustments are provided to plan members and beneficiaries at the discretion of the State Legislature. Plan members and agencies are required to contribute at rates established by State law. For fiscal year 2011, plan member’s contribution rate was 3.5% for all salary levels. The agency’s contribution for the entire fiscal year was 15.5%, computed based on all salaries. For the fiscal year ended June 30, 2011, the Office’s contributions to the plan, which were equal to the required contributions, were $880,217; contributions for the preceding fiscal year were $883,716. OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR FINANCIAL REPORT AS OF AND FOR THE YEAR ENDED JUNE 30, 2011 11 Note 6. Other Post-Employment Benefits In addition to the pension benefits described above, the State provides post-retirement health care benefits to retirees. OPERS pays $105 per month for all retirees who elect coverage at the time of retirement. There is no OPEB obligation information available specific to the Office. Note 7. Long-Term Obligations Long–term debt is comprised of accrued compensated absences. Vested accrued leave, up to a total of 480 hours, is payable upon termination, resignation, retirement, or death. In the Statement of Net Assets, this accrued leave is reported as a liability. The Amount Due Within One Year varies from year to year based on personnel turnover and the amount reported is an estimate. For the year ended June 30, 2011, accrued compensated absences liabilities changed as follows: Balance Balance Amount Due July 1, 2010 Additions Deductions June 30, 2011 Within One Year $ 460,157 $422,350 $401,238 $481,269 $422,973 Note 8. American Recovery and Reinvestment Act (ARRA) Funding During fiscal year 2011, the Office was awarded $300,000 in ARRA funding by Governor Brad Henry from the State Fiscal Stabilization Funds (CFDA #84.397). This funding was awarded for the purpose of budget stabilization. Note 9. Management’s Discussion and Analysis The office is not reporting Management’s Discussion and Analysis as required by GASB 34 as required supplementary information due to the lack of prior period audited financial information. 12 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCEWITH GOVERNMENT AUDITING STANDARDS State of Oklahoma Office of the Oklahoma State Auditor and Inspector Oklahoma City, Oklahoma We have audited the financial statements of Office of the Oklahoma State Auditor and Inspector (the "Office"), component unit of the State of Oklahoma, as of and for the year-ended June 30, 2011, and have issued our report thereon dated October 31, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audit contained in Government Auditing Standards issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Office's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Office’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Office’s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting 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 financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance And Other Matters As part of obtaining reasonable assurance about whether the Office's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, non-compliance 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 non-compliance or other matters that are required to be reported under Government Auditing Standards. Alan Behrens, CPA Lonnie Heim, CPA Marty Chisum, CPA, CFE _______________ Natalie Heim Barnes, CPA 13 This report is intended solely for the information and use of the State of Oklahoma Office of the Oklahoma State Auditor and Inspector, management, others within the entity and federal awarding agencies and pass-through entities and is not intended to be, and should not be, used by anyone other than these specified parties. Oklahoma City, Oklahoma October 31, 2011
Object Description
Okla State Agency |
Auditor and Inspector, Oklahoma State |
Okla Agency Code | '300' |
Title | Financial statements. |
Alternative title | Oklahoma. Office of the Auditor and Inspector.; HBC: CPAs & Advisors. |
Authors |
Oklahoma. Office of the Auditor and Inspector. HBC Associates. |
Publisher | Oklahoma Office of the Auditor and Inspector |
Publication Date | 2011 |
Publication type |
Audit |
Serial holdings | Electronic holdings: 2011 |
Subject | Oklahoma. Office of the State Auditor and Inspector--Auditing. |
Purpose | We have audited the accompanying financial statements of Office of the Oklahoma State Auditor and Inspector (the “Office”), a component unit of the State of Oklahoma, as of and for the year ended... as listed in the table of contents, which collectively comprise the financial statements of the reporting entity the Office of the Oklahoma State Auditor and Inspector. |
Notes | issues through 2011; Includes Independent Auditor's Report |
OkDocs Class# | A3700.3 F491s |
For all issues click | A3700.3 F491s |
Digital Format | PDF, Adobe Reader required |
ODL electronic copy | Downloaded from agency website: http://www.sai.ok.gov/Docs/FINAL-SA&I%2006302011.pdf |
Rights and Permissions | This Oklahoma state government publication is provided for educational purposes under U.S. copyright law. Other usage requires permission of copyright holders. |
Language | English |
Date created | 2012-01-25 |
Date modified | 2013-07-18 |
OCLC number | 890217264 |
Description
Title | 2011 Auditor and inspector financial statements |
OkDocs Class# | A3700.3 F491s 2011 |
Digital Format | PDF, Adobe Reader required |
ODL electronic copy | Downloaded from agency website: http://www.sai.ok.gov/Docs/FINAL-SA&I%2006302011.pdf |
Rights and Permissions | This Oklahoma state government publication is provided for educational purposes under U.S. copyright law. Other usage requires permission of copyright holders. |
Language | English |
Full text | FINANCIAL STATEMENTS JUNE 30, 2011 Includes Independent Auditor’s Report Issued By Office of the Oklahoma State Auditor and Inspector Table of Contents June 30, 2011 Page INDEPENDENT AUDITOR’S REPORT 1-2 STATEMENTS Statements of Net Assets 3 Statements of Revenues, Expenses and Changes in Net Assets 4 Statements of Cash Flows 5 Notes to Financial Statements 6 REPORT ON INTERNAL CONTROL OVER FINANICAL REPORTING AND ON COMPLINACE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCEWITH GOVERNMENT AUDITING STANDARDS 12-13 1401 Health Center Parkway, Yukon, Oklahoma 73099 827 NW 63rd, Suite 202, Oklahoma City, Oklahoma 73116 Phone (405) 848-7797 Fax (405) 848-7840 Web address www.hbc-cpas.com INDEPENDENT AUDITOR’S REPORT State of Oklahoma Office of the Oklahoma State Auditor and Inspector Oklahoma City, Oklahoma We have audited the accompanying financial statements of Office of the Oklahoma State Auditor and Inspector (the “Office”), a component unit of the State of Oklahoma, as of and for the year ended June 30, 2011 as listed in the table of contents, which collectively comprise the financial statements of the reporting entity the Office of the Oklahoma State Auditor and Inspector. These financial statements are the responsibility of the Office of the Oklahoma State Auditor and Inspector’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 audit contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of Office of the Oklahoma State Auditor and Inspector as of June 30, 2011 and the respective changes in net assets and cash flows thereof, for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated October 31, 2011 on our consideration of the Office’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and is important in assessing the results of our audit. 1 Alan Behrens, CPA Lonnie Heim, CPA Marty Chisum, CPA, CFE _______________ Natalie Heim Barnes, CPA 1401 Health Center Parkway, Yukon, Oklahoma 73099 827 NW 63rd, Suite 202, Oklahoma City, Oklahoma 73116 Phone (405) 848-7797 Fax (405) 848-7840 Web address www.hbc-cpas.com The Office has not presented management’s discussion and analysis. Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Oklahoma City, Oklahoma October 31, 2011 2 OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR STATEMENT OF NET ASSETS JUNE 30, 2011 ASSETS Current assets: Cash $835,091 Cash-restricted 27,507 Due from federal government 55,955 Accounts receivable, net of allowance of $563,807 680,001 Total current assets 1,598,554 Noncurrent assets: Notes receivable 42,012 Capital assets, net of accumulated depreciation of $3,553 9,632 Total noncurrent assets 51,644 Total assets 1,650,198 LIABILITIES Current liabilities: Accounts payable 172,158 Accrued wages payable 15,522 Compensated absences-payable within one year 422,973 Total current liabilities 610,653 Noncurrent liabilities: Compensated absences-payable after one year 58,296 Total noncurrent liabilities 58,296 Total liabilities 668,949 NET ASSETS Restricted for OSU 27,507 Invested in capital assets 9,632 Unrestricted 944,110 Total net assets $981,249 The notes to the financial statements are an integral part of this statement. 3 OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEAR ENDED JUNE 30, 2011 Operating revenues: Filing fees $ 161,090 Audit fees 4,489,851 Other fees 79,800 Total operating revenues 4,730,741 Operating expenses: Personal services 8,860,910 Travel 94,248 Administrative 578,713 Equipment 168,174 Depreciation 1,877 Total operating expenses 9,703,922 Operating income (loss) (4,973,181) Nonoperating revenues (expenses): Appropriations 5,152,672 ARRA awards 300,000 Pass-through OSU expenses (330,086) Total nonoperating revenue (expenses) 5,122,586 Change in net assets 149,405 Total net assets - beginning 831,844 Total net assets - ending $ 981,249 The notes to the financial statements are an integral part of this statement. 4 OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2011 CASH FLOWS FROM OPERATING ACTIVITIES Receipt of filing fees $161,090 Receipt of audit fees 4,368,181 Receipt of other fees 76,470 Payments for personal services (8,803,411) Payments for travel (94,460) Payments for administrative (572,843) Payments for equipment (124,493) Net cash provided (used) by operating activities (4,989,466) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Receipt of appropriations 5,152,672 Receipt of ARRA award 300,000 Pass-through payments to OSU (330,479) Net cash provided (used) by noncaptial financing activities 5,122,193 Net increase in cash 132,727 Cash July 1, 2010 729,871 Cash June 30, 2011 (including $27,507 reported in restricted cash) $ 862,598 Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (4,973,181) Adjustments to reconcile operating income to net cash provided (used) by operating activities: (Increase) decrease in due from federal government 9,156 (Increase) decrease in accounts receivable (92,145) (Increase) decrease in notes receivable (42,012) (Increase) decrease in capital assets (5,722) Increase (decrease) in accounts payable 56,198 Increase (decrease) in accrued wages payable 15,522 Increase (decrease) in compensated absences payable in one year 42,068 Increase (decrease) in compensated absences payable after one year 650 Total adjustments (16,285) Net cash provided by operating activities $ (4,989,466) The notes to the financial statements are an integral part of this statement. 5 OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR FINANCIAL REPORT AS OF AND FOR THE YEAR ENDED JUNE 30, 2011 6 The basic financial statements of the Oklahoma State Auditor and Inspector (the Office) have been prepared in conformity with the accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the Office’s accounting policies are described below. Notes to the Basic Financial Statements Note 1. Summary of Significant Accounting Policies A. Reporting Entity The Constitution of the State of Oklahoma provides under Article VI, Section 19 for a State Auditor and Inspector. Prior to 1979, the State maintained a separate Office of the State Auditor and the Office of the State Examiner and Inspector. However, effective January 8, 1979, a constitutional amendment merged the Office of the State Auditor and the Office of the State Examiner and Inspector, creating the Office of the Oklahoma State Auditor and Inspector (the Office). The Office is a part of the primary government (State of Oklahoma), and its financial data are included in the State’s Comprehensive Annual Financial Report. The accompanying financial statements are intended to present the financial position and results of operations of only that portion of the State of Oklahoma that is attributable to the Office. The Office has the following primary duties as specified in the Constitution and Statutes of Oklahoma, as well as other duties not listed here: Examine the State Treasurer’s and all county treasurers’ books and records; Examine the books and records of state agencies, boards, and commissions; Maintain copies of audit reports of public trusts; Maintain a repository for audits and budgets filed by counties, school districts, and towns; Provide fiscal support for the Pension Commission; Provide fiscal support for the Board of Equalization. The Office is funded by the Legislature of the State of Oklahoma (the Legislature) through appropriations to perform certain of its constitutional and statutory functions and by various fees charged, such as those for auditing and filing audit reports. OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR FINANCIAL REPORT AS OF AND FOR THE YEAR ENDED JUNE 30, 2011 7 B. Basis of Presentation and Accounting The Office accounts for its activities within a proprietary fund type. The Office’s activities meet the definition of an enterprise fund because it is the intent of the Agency to recover, primarily through user charges, the cost of providing goods or services to the general public. The proprietary fund type is accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of this fund are included on the statement of net assets. Proprietary fund operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in net total assets. The accrual basis of accounting is utilized by the proprietary fund. Under this basis of accounting, revenues are recognized when earned and expenses are recognized when the liability is incurred. As required by the GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the Office has elected to apply all applicable GASB pronouncements and does not apply Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or after November 30, 1989. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services in connection with a proprietary fund’s principal ongoing operations. Revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. C. Assets, Liabilities, and Equity Cash All cash balances are held by the Oklahoma Office of the State Treasurer. The Office’s cash is pooled with the cash of all other state agencies; this pool of cash is deposited in banks or invested by the State Treasurer in accordance with Oklahoma Statutes. The State Treasurer requires that financial institutions deposit collateral securities to secure the deposits of the State in each such institution. The Office, for the purposes of reporting cash flows, considers cash equivalents to include all highly liquid investments with an original maturity of three months or less. Capital Assets The Department of Central Services, in accordance with Oklahoma Statutes, Title 74 § 110.1, has primary responsibility to maintain control of all property and equipment owned by the State of Oklahoma with a cost in excess of $500. The Department of Central Services has delegated to each of the various state agencies the responsibility to maintain the accounting records for property and equipment purchased and used by each agency. Capital assets are defined, by the Office, as assets that have a cost in excess of $5,000 at the date of acquisition. OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR FINANCIAL REPORT AS OF AND FOR THE YEAR ENDED JUNE 30, 2011 8 Compensated Absences Employees earn annual leave at the average rate of 10 hours per month for up to 5 years service, an average of 12 hours per month for 5 to 10 years, an average of 13.33 hours per month for 10 to 20 years, and an average of 16.67 hours per month for over 20 years of service. Employees with up to 5 years service may accumulate to a maximum of 240 hours and employees with over five years service may accumulate to a maximum of 480 hours. Accounts Payable Accounts payable include all unpaid charges for services or goods incurred on or before June 30. These payables represent amounts incurred in the ordinary course of business and are primarily owed to vendors. Wages Payable Wages Payable consists of all wages earned prior to June 30th that were not paid by June 30th. Income Taxes The Office, as an integral part of the State, is exempt from federal and state income taxes. Cash and Net Assets – Restricted Each year, the Legislature appropriates funds to the Office to be paid to Oklahoma State University (OSU) for the County Training Program, administered by the Commission on County Government Personnel Education and Training, mandated by 19 O.S., §130.1 et seq. The Office has no administrative duties related to this program. The Legislature appropriated $330,086 for this program in fiscal year 2011. These funds are legally restricted; therefore, the balance remaining at June 30, 2011 have been shown as restricted cash and restricted net assets on the Statement of Net Assets. Accounts Receivable Accounts receivable consist of amounts due from state agencies, counties, school districts, cities, ambulance services, and various quasi-governmental entities in the State for audit services rendered by the Office. The amount presented is net of the allowance for doubtful accounts of $563, 807 for fiscal year 2011. The allowance for doubtful accounts consists of accounts outstanding for more than 120 days. The policy of the Office is to bill for the audit services rendered while the audit is in progress. Bills are submitted approximately once per month during the progression of the audit, with a final billing at completion. Notes Receivable Notes receivable consist of collectible accounts receivable that are not expected to be fully collected within one year. OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR FINANCIAL REPORT AS OF AND FOR THE YEAR ENDED JUNE 30, 2011 9 Due from Federal Government The Office is under contract with the Federal Department of the Interior to perform audits and related investigations of federal oil and gas leases located in Oklahoma in accordance with section 205 of the Federal Oil and Gas Royalty Act. The amounts presented are reimbursements receivable for work performed during May and June of fiscal year 2011. Personal Services Personal Services consists of all payroll and related costs (including regular and part-time salaries, longevity payments, retirement, and group insurance premiums), as well as payments for professional services (such as auditing fees, data processing services, and various other general services). Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. Note 2. Capital Assets The Office reports capital assets at cost, net of accumulated depreciation. Capital assets are defined as assets with initial costs of $5,000 or more and an expected useful life of five years or more. Depreciation is computed on the straight-line method over the estimated useful lives: Computer equipment 5 years Furniture and equipment 10 years A half year’s depreciation is taken in the year an asset is placed in service. When assets are disposed of, depreciation is removed from the respective accounts and the resulting gain or loss, if any, is recorded. Capital asset activity for the year ended June 30, 2011 was as follows: Accumulated Capital Equipment Depreciation Assets(net) Beginning balance $ 5,586 $ (1,676) $ 3,910 Increases 7,599 (1,877) 5,722 Decreases - - - Ending balance $ 13,185 $ (3,553) $ 9,632 OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR FINANCIAL REPORT AS OF AND FOR THE YEAR ENDED JUNE 30, 2011 10 Note 3. Operating Leases The Office leases certain office space and equipment which meet the criteria for operating leases. Total costs of such leases were approximately $401,337 for fiscal year 2011. The future minimum lease payments for these leases are as follows: 2012 $ 163,063 2013 19,367 2014 6,347 2015 _ 2016 _ Total $ 188,777 Note 4. Risk Management As part of the State of Oklahoma primary government, the Office’s risk of losses to which they are exposed is managed through the State’s risk management activities. The Office is subject to risks of loss from tort claims, property loss, health claims, and workers’ compensation claims. In general, the State is self insured for health care claims, workers’ compensation claims, tort claims, and property losses. These services are provided by the certain departments of the State’s General Fund and two state component units. The Office is at no financial risk of loss from these types of risks. Note 5. Pension Plan Participation The Office contributes to the Oklahoma Public Employees Retirement System (OPERS) plan. The OPERS is a statewide cost-sharing multiemployer defined benefit retirement plan. A separately issued annual report for OPERS may be obtained from the Public Employees Retirement System, 5801 N. Broadway Extension, Suite 400, Oklahoma City, 73118-7484. The plan provides retirement, disability, and death benefits to plan members and their beneficiaries. The pension benefit provisions are established and amended by the State Legislature. Cost-of-living adjustments are provided to plan members and beneficiaries at the discretion of the State Legislature. Plan members and agencies are required to contribute at rates established by State law. For fiscal year 2011, plan member’s contribution rate was 3.5% for all salary levels. The agency’s contribution for the entire fiscal year was 15.5%, computed based on all salaries. For the fiscal year ended June 30, 2011, the Office’s contributions to the plan, which were equal to the required contributions, were $880,217; contributions for the preceding fiscal year were $883,716. OFFICE OF THE OKLAHOMA STATE AUDITOR AND INSPECTOR FINANCIAL REPORT AS OF AND FOR THE YEAR ENDED JUNE 30, 2011 11 Note 6. Other Post-Employment Benefits In addition to the pension benefits described above, the State provides post-retirement health care benefits to retirees. OPERS pays $105 per month for all retirees who elect coverage at the time of retirement. There is no OPEB obligation information available specific to the Office. Note 7. Long-Term Obligations Long–term debt is comprised of accrued compensated absences. Vested accrued leave, up to a total of 480 hours, is payable upon termination, resignation, retirement, or death. In the Statement of Net Assets, this accrued leave is reported as a liability. The Amount Due Within One Year varies from year to year based on personnel turnover and the amount reported is an estimate. For the year ended June 30, 2011, accrued compensated absences liabilities changed as follows: Balance Balance Amount Due July 1, 2010 Additions Deductions June 30, 2011 Within One Year $ 460,157 $422,350 $401,238 $481,269 $422,973 Note 8. American Recovery and Reinvestment Act (ARRA) Funding During fiscal year 2011, the Office was awarded $300,000 in ARRA funding by Governor Brad Henry from the State Fiscal Stabilization Funds (CFDA #84.397). This funding was awarded for the purpose of budget stabilization. Note 9. Management’s Discussion and Analysis The office is not reporting Management’s Discussion and Analysis as required by GASB 34 as required supplementary information due to the lack of prior period audited financial information. 12 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCEWITH GOVERNMENT AUDITING STANDARDS State of Oklahoma Office of the Oklahoma State Auditor and Inspector Oklahoma City, Oklahoma We have audited the financial statements of Office of the Oklahoma State Auditor and Inspector (the "Office"), component unit of the State of Oklahoma, as of and for the year-ended June 30, 2011, and have issued our report thereon dated October 31, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audit contained in Government Auditing Standards issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Office's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Office’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Office’s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting 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 financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance And Other Matters As part of obtaining reasonable assurance about whether the Office's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, non-compliance 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 non-compliance or other matters that are required to be reported under Government Auditing Standards. Alan Behrens, CPA Lonnie Heim, CPA Marty Chisum, CPA, CFE _______________ Natalie Heim Barnes, CPA 13 This report is intended solely for the information and use of the State of Oklahoma Office of the Oklahoma State Auditor and Inspector, management, others within the entity and federal awarding agencies and pass-through entities and is not intended to be, and should not be, used by anyone other than these specified parties. Oklahoma City, Oklahoma October 31, 2011 |
Date created | 2012-01-25 |
Date modified | 2012-01-25 |
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