Trinity County Financial Statements and Related Accounting Matters

The Independent Auditor’s Report is dated September 13, 2000. That report was not available to the public or the Grand Jury until April 2001. Since audits are normally dated on the last day of field- work done by the independent auditor, the audit was dated Septem- ber 13, 2000. The delay until April was the time taken to write the report. Both the Independent Auditor and the County Auditor/Controller have taken steps to expedite the audit for the year ending June 30, 2001. Language was included in the contract requiring a timely delivery of the audit and the Independent Auditor scheduled field work early in the year. A preliminary draft of the June 30, 2001, audit report (except for the cost report from the medical center) was delivered to the County Auditor/Controller on Dec. 4, 2001. The final audit report (which includes the hospital’s conservative cost estimates) arrived from the Independent Auditor to the Audi- tor/Controller’s office on January 23, 2002.

The Independent Auditor’s Report for the year ended June 30, 2000 is a qualified report. A qualified report is issued when there are qualifications (exceptions) to the Independent Auditor’s opinion that the financial statements fairly present the financial position and results of operations of the County. The report contains the following statement: “Because of the inadequacy of accounting records for fixed assets, we were unable to form an opinion regarding the amount at which the General Fixed Assets Account Group (stated at $22,944,534), and fixed assets and accumulated depreciation in proprietary fund types (stated at $5,944,728 and $1,938,329, respectively), or the amount of depreciation expense (stated at $382,363) are recorded in the accompanying financial statements as of and for the year ended June 30, 2000.” The Grand Jury has been informed that obtaining an unqualified independent auditor’s report would require an additional auditing cost of $8,000 per year, plus an undetermined amount of labor to improve the accounting records. While the County Auditor/Con- troller and the County Administrative Officer’s responses indicate that the County’s accounting records accurately reflect fixed assets and accumulated depreciation, the Grand Jury has been informed that the accounting records only cover equipment. They do not have detail to back up the financial statements’ balances for land, build- ings and their locations, cost, use, and dates of acquisition. The County Auditor/Controller, County Board of Supervisors, and County Administrative Officer have indicated they felt the benefit of an unqualified audit report was not worth the $8,000 required for including an audit of the fixed assets in the independent auditor’s annual audit of the county’s general purpose financial statements. The 2000-2001 Grand Jury recommended that the fixed assets be included in the audit performed by the independent auditors. The Grand Jury has been informed that the independent auditors have recommended for several years that the fixed assets be included in the audit. While the Grand Jury understands that the County does not desire to expend more than. needed on the audit, the same argument that the cost outweighs the benefit of the audit could be applied to all other areas of the audit. The balance in the fixed assets account group is material to the overall general-purpose financial statements. Auditing the fixed assets will enable the independent auditors to verify that the fixed assets as presented in the general purpose fi- nancial statements of the County, agree with the detailed records of fixed assets; that the fixed assets exist and are owned by the county; that they are not encumbered (or that such encumbrance is reflected in the general purpose financial statements); and that they are be- ing used for the functions for which they were authorized.

In the County Auditor/Controller’s response to the fourth recom- mendation in the final report of the 2000-2001 Grand Jury, he indi- cated that the “statements are produced by the Independent Auditor and the County cannot control what is in the notes.” However, the audit report states that the County, not the Independent Auditor, is responsible for the financial statements and their notes.