GOVERNMENT AUDITING STANDARDS

GOVERNMENT AUDITING STANDARDS

Government Auditing Standards Report 197

198

REPORT OF INDEPENDENT AUDITORS ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Board of County Commissioners Lane County, Oregon We have audited the financial statements of the governmental activities, the business type activities, each major fund, the aggregate remaining fund information of Lane County, Oregon (the County) as of and for the year ended June 30, 2011, which collectively comprise the County s basic financial statements and have issued our report thereon dated December 8, 2011. Our report includes a reference to other auditors. 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. Other auditors audited the financial statements of the Housing and Community Services Agency of Lane County, a discretely presented component unit, as described in our report of the County s financial statements. This report does not include the results of the other auditor s testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. INTERNAL CONTROL OVER FINANCIAL REPORTING Management of Lane County is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the County 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 County s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the County 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 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. 199

COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the County s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to management of the County in a separate letter dated December 8, 2011. This report is intended solely for the information and use of management, others within the entity, Board of County Commissioners, the Secretary of State, Divisions of Audits, of the State of Oregon, 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. Eugene, Oregon December 8, 2011 200

OMB Circular A-133 (Single Audit) Report 201

202

REPORT OF INDEPENDENT AUDITORS ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A 133 The Board of County Commissioners Lane County, Oregon COMPLIANCE We have audited Lane County s (the County) compliance with the types of compliance requirements described in the OMB Circular A 133 Compliance Supplement that could have a direct and material effect on each of the County s major federal programs for the year ended June 30, 2011. The County s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the County s management. Our responsibility is to express an opinion on the County s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A 133, Audits of States, Local Governments, and Non Profit Organizations. Those standards and OMB Circular A 133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the County s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the County s compliance with those requirements. In our opinion, the County complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2011. INTERNAL CONTROL OVER COMPLIANCE Management of the County is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the County s internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A 133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the County s internal control over compliance. 203

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, others within the entity, Board of County Commissioners, the Secretary of State, Divisions of Audits, of the State of Oregon, 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. Eugene, Oregon December 8, 2011 204

Lane County, Oregon Schedule of Expenditures of Federal Awards For Fiscal Year ended June 30, 2011 Federal Grantor and Program Title CFDA Number Pass Through Entity Number Expenditures US Department of Agriculture Passed through Oregon Department of Administrative Services: Schools and Roads Grants to States 10.665 PL 106-393 $ 22,949,976 Passed through Oregon Department of Education: School Breakfast Program 10.553 25,031 School Lunch Program 10.555 45,927 Passed through Oregon Health Department: Special Supplemental Nutrition Program for Women, Infants and Children 10.557 1,255,067 US Department of Agriculture Total 24,276,001 US Department of Defense Passed through Oregon Department of Administrative Services: Federal Flood Control Lease 12.112 21,995 US Department of Defense Total 21,995 US Department of Commerce Direct Programs: Community Trade Adjustment Assistance 11.010 84,940 US Department of Commerce Total 84,940 US Department of Energy Passed through Oregon Housing & Community Services: Weatherization Assistance for Low-Income Persons 81.042 BPA 10/BPA 11/BPA 12/DOE 10 501,755 Weatherization Assistance for Low-Income Persons 81.042 ARRA DOE ARRA 09 1,032,934 Energy Efficient Appliance Rebate Program (EEARP) 81.127 ARRA DOE FP 10 150,119 US Department of Energy Total 1,684,808 US Department of Environmental Quality Passed through Oregon Department of Human Services: State Public Water System Supervision 66.432 55,916 Capitalization Grants for Drinking Water State Revolving Funds 66.468 68,772 US Department of Environmental Quality Total 124,688 US Department of Health and Human Services Direct Programs: Consolidated Health Centers 93.224 1,264,862 Health Care and Other Facilities 93.887 164,280 Affordable Care Act-Consolidated Health Centers 93.526 4,404,922 Grants to Health Center Programs-ARRA 93.703 ARRA 175,414 Passed through Oregon Department of Human Services: Youth Suicide Prevention Svcs 93.243 15,050 West Nile Surveillance 93.283 4,658 Medical Assistance Program 93.778 960,981 Passed through Oregon Commission on Children and Families Promoting Safe and Stable Families 93.556 96,300 Social Services Block Grant 93.667 535,562 Medical Assistance Program 93.778 73,878 Passed through Oregon Department of Justice: Child Support Enforcement 93.563 1,248,615 Child Support Enforcement 93.563 ARRA 47,497 Drug Court Enhancement Grant 93.243 161,027 Passed through Oregon Health & Sciences University: Oregon Health & Sciences University 93.994 48,517 Passed through Oregon Health Department: Public Health Emergency Preparedness-Bio-Terrorism 93.069 198,356 Public Health Emergency Preparedness-Pandemic Flu 93.069 128,463 Healthy Communities 93.070 64,501 Tuberculosis Control Programs 93.116 6,667 Family Planning Services 93.217 67,303 Immunization Grants-noncash assistance 93.268 128,453 Immunization Grants 93.268 1,540 H1N1 Emergency Response 93.283 13,760 205

Lane County, Oregon Schedule of Expenditures of Federal Awards For Fiscal Year ended June 30, 2011 Federal Grantor and Program Title CFDA Number Pass Through Entity Number Expenditures Medical Assistance Program 93.778 36,000 HIV Prevention Activities 93.940 44,974 Immunization Grants 93.991 3,700 Maternal and Child Health Services Block Grant 93.994 35,442 Passed through Oregon Housing & Community Services: Housing Stabilization Program 93.558 52,872 Low Income Energy Assistance Program 93.568 2010 LIEAP / 2011 LIEAP 4,525,795 Community Services Block Grant 93.569 CSBG 10 460,297 Community Services Block Grant 93.710 ARRA CSBG ARRA 09/CSBG ARRA 09 BE 24,272 US Department of Health and Human Services Total 14,993,958 US Department of Homeland Security Passed through Oregon Emergency Management: Emergency Management Performance Grant 97.042 139,752 Homeland Security Program 97.073 15,443 State Homeland Security Program Grant 09-248 97.073 6,227 Buffer Zone Protection Program Grant 97.078 79,051 Passed through Oregon State Marine Board: Boating Safety and Financial Assistance 97.012 461,799 US Department of Homeland Security Total 702,272 US Department of Housing and Urban Development Passed through City of Eugene: Community Development Block Grant 14.218 350,000 Passed through City of Springfield: Community Development Block Grant 14.218 99,488 Homelessness Prevention Rapid Rehousing Program 14.257 ARRA 366,948 Passed through Oregon Business Development Department: Community Development Block Grant 14.228 661,954 Passed through Oregon Department of Human Services: Supportive Housing Program 14.235 1,198,889 Passed through Oregon Housing & Community Services: Emergency Shelter Grants Program 14.231 186,355 Supportive Housing Program 14.235 17,325 HOME Investments Partnerships Program 14.239 HOME TBA 183,299 Homelessness Prevention Rapid Rehousing Program 14.257 ARRA 538,456 US Department of Housing and Urban Development Total 3,602,714 US Department of Justice Direct Programs: Drug Court Enhancement Grant 16.585 27,208 Intensive Treatment and Supervision and Reentry Programs 16.753 2,656 Regional Shared Public Safety Technology Improvements 16.753 55,160 Passed through Department of Corrections: Second Chance Act Housing Grant 16.812 18,250 Passed through Oregon Department of Justice: Grants to Encourage Arrest Policies and Enforcement of Protection Orders 16.590 184,036 State Criminal Alien Assistance Program 16.606 326,039 Bulletproof Vest Partnership Grant 16.607 27,668 COPS Meth Grant 16.710 151,438 Public Safety Partnership and Communtiy Policing Grants 16.710 ARRA 217,661 Edward Byrne Memorial Justice Assistance Grant Program 16.738 2,235 Recovery Act - Edward Byrne Memorial Justice Assistance Grant (JAG) 16.804 ARRA 124,467 Passed through Oregon Commission on Children and Families: Disproportionate Minority Contact Assessment 16.549 12,313 Juvenile Accountability Block Grant 16.523 28,247 206

Lane County, Oregon Schedule of Expenditures of Federal Awards For Fiscal Year ended June 30, 2011 Federal Grantor and Program Title CFDA Number Pass Through Entity Number Expenditures Passed through Oregon Criminal Justice Commission: Drug Court-Oregon Criminal Justice Comm Support 16.738 131,411 Drug Interdiction support for small city law enforcement 16.738 21,084 ReEntry Resource Center 16.738 116,729 Recovery Act - Edward Byrne Memorial Justice Assistance Grant (JAG) 16.803 ARRA 40,341 STOP Violence Against Women Formula Grant 16.588 83,969 Crime Victim Assistance 16.575 149,543 US Department of Justice Total 1,720,455 US Department of Labor Direct Programs: WIA Pilots, Demonstrations, and Research Projects 17.261 478,185 Passed through Lane Workforce Partnership: Workforce Initiative Act 17.259 95,015 US Department of Labor Total 573,200 US Department of the Interior Direct Programs: Payment in Lieu of Taxes 15.226 PILT 575,104 Distribution of Receipts to State and Local Governments (O&C) 15.227 11,905,685 Secure Rural Schools and Community Self-Determination 15.234 330,762 Passed through Oregon State Marine Board: Maintenance Assistance Payment Clean Vessel (CVA) 15.616 124,405 US Department of the Interior Total 12,935,956 US Environmental Protection Agency Passed through Oregon Department of Environmental Quality: ARRA Clean Diesel Grant 66.040 ARRA 21,508 US Environmental Protection Agency Total 21,508 US Department of Transportation Passed through Lane Council of Governments: Unified Planning Work Program 20.205 25,000 Passed through Oregon Department of Transportation: ARRA-ODOT-Road Improvements 20.205 ARRA 251,448 Highway Planning and Construction-High Priority 7-County Comm Proj 20.205 73,559 Highway Planning and Construction 20.205 99,631 State and Community Highway Safety MUTT Grants 20.600 SC-10-35-05 LCS 203,110 Passed through City of Springfield: Highway Planning and Construction 20.205 ARRA 6,309 Passed through Western Federal Lands Highway Division: Highway Planning and Construction 20.205 807,194 Passed through Oregon State Sheriffs Association: OSSA Seatbelt/DUII OT Enforcement 20.600 Lane County 22,772 OSSA DUII Enforcement Grant 20.601 Lane County 30,697 US Department of Transportation Total 1,519,720 US Forest Service Direct Programs: Schools and Roads Grants to States-Youth Services US Forest maint. 10.665 127,641 US Forest Service Total 127,641 Total Expenditures of Federal Awards $ 62,389,856 207

Lane County, Oregon Notes to Schedule of Expenditures of Federal Awards For the Fiscal Year Ended June 30, 2011 1. Purpose of the Schedule The accompanying schedule of expenditures of federal awards is a supplementary schedule to Lane County, Oregon's (the "County") basic financial statements and is presented for purposes of additional analysis. Because the schedule presents only a selected portion of the activities of the County, it does not present the financial position, changes in financial position, or the cash flows of the County. 2. Significant Accounting Policies Reporting Entity The reporting entity is fully described in Note I.A. to the County's basic financial statements. The schedule includes all federal programs administered by the County for the fiscal year ended June 30, 2011 except for those administered by the Housing and Community Services Agency. This component unit receives federal monies under its own employer identification number and independently submits its schedule and related internal control and compliance reports as required by OMB Circular A-133. Basis of Presentation The information in the schedule is presented in accordance with OMB Circular A-133. Federal Financial Assistance Pursuant to the Single Audit Act and OMB Circular A-133, federal financial assistance is defined as assistance provided by a federal agency, either directly or indirectly, in the form of grants, contracts, cooperative agreements, loans, loan guarantees, property, interest subsidies, insurance, or direct appropriations. Accordingly, nonmonetary federal assistance, including federal surplus property, is included in federal financial assistance and is reported on the schedule (if applicable). Federal financial assistance does not include direct federal cash assistance to individuals. Solicited contracts between the County and the federal government for which the federal government procures tangible goods or services are not considered to be federal financial assistance. Major Programs The Single Audit Act and OMB Circular A-133 establish criteria to be used in defining major programs. Major programs are those programs selected for testing using a risk-assessment model, as well as certain minimum expenditure requirements, as outlined in OMB Circular A-133. Programs with similar requirements may be grouped into a cluster for testing purposes. Basis of Accounting Receipts and expenditures are accounted for using the modified accrual basis of accounting. Revenues are recorded when measurable and available, or in the case of grants where expenditure is the prime factor for determining eligibility, when the expenditure is made. Expenditures are recorded when a liability is incurred. 3. Insurance Coverage For the year ended June 30, 2011, the County had insurance in effect as recommended by their agent of record which was comparable in coverage to other counties of similar size and circumstance. 4. Non-cash Assistance A total of $128,453 was received in non-cash assistance and is included in federal awards expended. 208

LANE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2011 Financial Statements Type of auditor s report issued: Internal control over financial reporting: Section I - Summary of Auditor s Results Unqualified Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major programs: Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X none reported Type of auditor s report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? yes X no Identification of major programs: CFDA Number(s) Name of Federal Program or Cluster 10.665 Schools and Roads, Grants to States 14.257 Homelessness Prevention Rapid Re-housing Program 20.205 Highway Planning and Construction 93.526 Affordable Care Act (ACA) Grants for Capital Development in Health Centers 93.568 Low-Income Home Energy Assistance Program Dollar threshold used to distinguish between type A and type B programs: $ 1,871,696 Auditee qualified as low-risk auditee? X yes no None reported Section II - Financial Statement Findings 209

LANE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2011 None reported Section III - Federal Award Findings and Questioned Costs 210

Lane County, Oregon Summary Schedule of Prior Audit Findings For the Fiscal Year Ended June 30, 2011 Follow-up on findings reported June 30, 2010 Findings Financial Statement Audit None Findings and Questioned Costs Major Federal Award Programs Audit Finding 2010-01: Completeness of Schedule of Expenditures of Federal Awards Significant Deficiency in Internal Control Condition: The County s SEFA omitted $591,553 in federal expenditures. The expenditures are for the Low-Income Energy Assistance Program and the federal funds are passed through from the State of Oregon. Recommendation: We recommend the County implement a process for departments to present federal expenditures in a clearer manner, so the SEFA is accurate and complete. Status: Fully Resolved. The Department has analyzed the deficiency and determined that additional documentation on major programs will be requested from County departments in future years to provide additional support for amounts presented. Furthermore, a working paper review by management will be performed on the SEFA prior to release to the auditors. Finding 2010-02: Subrecipient Monitoring Significant Deficiency in Internal Controls and Instance of Non-Compliance Condition: The County will often provide federal awards to other nonfederal entities, known as subrecipients, to carry out federal programs. The County has certain responsibilities as the federal awarding agency to the other entities. The County is responsible for ensuring the audits are completed and reports are received in a timely manner and in accordance with the Circular A-133 requirements. We identified instances when the County policy does not require review of subrecipient audits. Recommendation: We recommend the County review its policies surrounding the monitoring requirements of intergovernmental agreements, and ensure the policies are in agreement with federal requirements. Status: Fully Resolved. The Department of Health and Human Services has analyzed the compliance finding and made changes to include IGA subrecipients and notified agencies of the changes. The revised policy is being finalized and signed by the Department Director. 211

212