Audit Wrap Up &
Presentation
New Hanover County Board of Education
December 3, 2013
Cherry Bekaert LLP
2626 Glenwood Avenue | Suite 200 | Raleigh, NC 27608
919.782.1040 | www.cbh.com
Table of Contents
1 Overview
2 Audit Areas of Focus
3 Results
 Financial Statements
 OMB A-133 Audit
 State Single Audit
4 Required Communications
5 Accounting Measurements & Metrics
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Overview
Audit of Financial Statements
We have completed our audit of the financial statements of the Board for the year ended June
30, 2013.
Our audit was conducted in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to the financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States. This
audit of the financial statements does not relieve management or those charged with
governance of their responsibilities.
We are responsible for forming and expressing an opinion about whether the financial
statements that have been prepared by management with the oversight of those charged with
governance are presented fairly, in all material respects, in conformity with generally accepted
accounting principles.
The objective of our audit was to obtain reasonable - not absolute - assurance about whether
the financial statements are free from material misstatements. The scope of the work performed
was substantially the same as that described to you in our engagement letter.
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Overview (continued)
Internal Control Over Financial Reporting
In accordance with Government Auditing Standards, we have also issued our report on our
consideration of the Board’s internal control over financial reporting and our tests of its
compliance with certain provisions of laws, regulations, contracts, grant agreements and other
matters. The purpose of the 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.
Our consideration of internal control was for the limited purpose described above and was not
designed to identify all deficiencies in internal control that might be significant deficiencies or
material weaknesses.
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Overview (continued)
Internal Control Over Compliance
In accordance with OMB Circular A-133, Audits of States, Local Governments, and Non-Profits,
and the State Single Audit Implementation Act we have also issued our report on our
consideration of the Board’s compliance with requirements of laws, regulations, contracts and
federal and State grants that could have a direct and material effect on the determination of the
financial statement amounts. The purpose of the report is to describe the scope of our testing
over compliance and the results of that testing, and not to provide an opinion on the internal
control over compliance.
Our consideration of internal control was for the limited purpose described above and was not
designed to identify all deficiencies in internal control that might be significant deficiencies or
material weaknesses.
All records and information requested by Cherry Bekaert LLP were freely available for our
inspection.
Management and other personnel provided full cooperation.
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Audit Areas of Focus
Primary Area of Focus
Procedures Performed
Compliance with new
GAAP (GASB)
regulations
Discussed with management and evaluated new accounting and reporting
requirements to determine the extent these pronouncements affect the
Board. GASB statements No. 63 & 65 were implemented in the current
year.
Cash
Cash reconciliations were inspected for accuracy and agreed to original
bank statements.
Receivables and
Revenue
Analytically reviewed revenue and receivables and significant items were
confirmed directly with revenue sources.
Capital Assets
Obtained the capital asset roll forwards and the capital outlay reconciliation
and analytically reviewed depreciation expense.
Accounts Payable and
Expenses
Search for unrecorded liabilities was performed
reasonableness of accounts payable at 6/30/13.
Payroll Expenses
Analytical procedures were performed on payroll expense which included
salaries, benefits and payroll taxes.
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to
assess
the
Audit Areas of Focus (continued)
Primary Area of Focus
Procedures Performed
Debt
Obtained the LT Debt roll forwards and analytically reviewed compensated
absences.
Single audit
Performed test of compliance with grant agreements and certain laws and
regulations.
Litigation
Discussed actual and threatened litigation with management and obtained
representations with respect to the effect of litigation on the financial statements.
Management's
Judgments and
Accounting Estimates
Accounting estimates are an integral part of the financial statements and are based
on management’s current judgments. We believe that the following items represent
significant judgmental areas that impact the Board’s financial reporting:
•
•
•
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Allowance for doubtful accounts
Depreciation expense
Potential charter school liability
Results on Financial Statements
Category
Definition
Opinion
Unmodified
Internal Control
No significant deficiencies or material weaknesses noted.
Statutory Compliance
No instances of noncompliance noted.
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Results on OMB A-133 Audit
Category
Definition
Opinion
Unmodified
Internal Control
No significant deficiencies or material weaknesses noted.
Statutory Compliance
No instances of noncompliance noted.
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Results on State Single Audit
Category
Definition
Opinion
Unmodified
Internal Control
No significant deficiencies or material weaknesses noted.
Statutory Compliance
One instance of nonmaterial noncompliance noted related
to special tests & provisions.
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Required Communications
Matters Required to be Reported to Those Charged with Governance
Requirement
Discussion Points
Auditor’s judgment about the
quality of the Board’s accounting
policies, estimates and financial
statement disclosures
In accordance with applicable auditing standards, a discussion was held regarding the quality of financial
reporting, which included the Board’s significant accounting practices, estimates and financial statement
disclosures.
Critical accounting policies and
practices
Please refer to Primary Areas of Focus in section two.
Adoption of a change in
accounting principle
Board adopted GASB 63 and GASB 65 in the current year, which resulted in changes to the financial
statement presentation. There were no other significant changes in accounting principles where the
application of alternative generally accepted accounting principles, including alternative methods of
applying an accounting principle, would have a material effect on the Board’s financial statements.
Material, corrected misstatements
brought to the attention of
management by the auditor
There were no material misstatements detected as a result of our audit procedures required to be
corrected by management.
Uncorrected misstatements, other
than those the auditor believes to
be trivial
There were no passed adjusting journal entries noted during the audit.
Disagreements with management
There were no disagreements with management on financial accounting and/or reporting matters and
auditing procedures that, if not satisfactorily resolved, would cause a modification of our auditors’ report.
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Required Communications (continued)
Matters Required to be Reported to Those Charged with Governance
Requirement
Discussion Points
Consultations with other
accountants
We are not aware of any consultations about accounting or auditing matters between
management and other independent public accountants, nor are we aware of opinions
obtained by management from other independent public accountants on the
application of generally accepted accounting principles.
Major issues discussed with
management prior to retention
Prior to our being retained as auditor for the current fiscal year, there were no major
accounting or other issues of concern discussed with management.
Significant issues discussed with
management
Please refer to the Results of Our Audit in section two.
Significant difficulties encountered
during the audit
There were no significant difficulties encountered during the audit.
Representations requested from
management
We have received a management representation letter signed by management.
Other issues arising from the audit
the auditor considers significant
and relevant to those charged with
governance
The Clarity Standards were required to be implemented in the current year. Impact of
these standards was a change in the wording of the auditors’ report and some
additional consideration relating to the Board being a group audit. There were no other
issues arising from the audit that we consider significant and relevant to those charged
with governance.
Material alternative accounting
treatments discussed with
management
There was no discussion with management concerning alternative accounting
treatments.
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Accounting Measurements & Metrics
Statement of Net Position
Governmental and Business-Type Activities:
Total assets decreased by approximately $3.5m or 1.2%. The most significant changes were:
• Capital assets decreased by approximately $6.8m due to the reduction of capital spending and an increase in
depreciation expense.
• Due from other governments increased by approximately $1.5m due mainly to Qualified School Construction
Bonds and Lottery amounts receivable at year end from New Hanover County.
Governmental and Business-Type Activities:
Total liabilities and deferred inflows of resources increased by approximately $3.6m or 18.9%. The most
significant change was:
• Long-term liabilities due in more than one year increased by approximately $3.6m as there was less usage of
annual leave partially due to the five bonus leave days provided to qualifying employees.
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Accounting Measurements & Metrics
(continued)
Statement of Activities
Governmental Activities:
Total revenues increased approximately $5.8m or 2.7%. The most significant changes were:
• $4.0m increase due to additional State Public Schools Fund revenue.
• $1.2m increase due to additional Race-to-the-Top revenue .
• $832k increase due to additional IDEA grant revenue.
Total expenses increased by approximately $11.6m or 5.3%. The most significant changes were:
• $3.8m increase in State Public School Fund payroll and related expenses due to funding positions that have
been ARRA funded in previous years.
• $1.2m increase in Race-to-the-Top expenses due to technology enhancement projects.
• $2.0m increase in General Fund mainly due to increased payroll and related expenses to funding positions
that have been ARRA funded in previous years.
• $960k increase related to increased debt service on installment purchases.
• $498k increase related to the NC-Prekindergarten program.
Business-Type Activities:
Total revenues increased by $335k or 2.9%. The most significant change was:
• $475k increase in Federal Reimbursements due to additional service requirements of Child Nutrition
Services.
Total expenses increased by approximately $388k or 3.3%. The most significant changes were:
• $183k increase in food costs of due to additional service requirements of Child Nutrition Services.
• $260k increase in salaries and fringe benefits due to increased service and increased employment costs.
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Accounting Measurements & Metrics
(continued)
$50
$269
ASSETS- General Fund (Modified Accrual Basis) (thousands)
2012
2013
$914
Cash and
$1,204
$22
investments
Due from other
governments
Accounts
receivable
Inventories
$360
$29,313
$150
$299
$27,941
Cash and
investments
Due from other
governments
Accounts
receivable
Inventories
Prepaids
Prepaids
LIABILITIES AND FUND BALANCE- General Fund (Modified Accrual Basis) (thousands)
2013
$3,243
$3,061
Liabilities
$28,136
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Fund balance
2012
Liabilities
$26,081
Fund balance
Accounting Measurements & Metrics
(continued)
FUND BALANCE- General Fund (Modified Accrual Basis) (thousands)
2013
2012
$1,565
$1,212
$710
$172
$3,455
$7,922
$17,939
Nonspendable
Nonspendable
Restricted
Restricted
Assigned
Unassigned
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Assigned
$21,243
Unassigned
Accounting Measurements & Metrics
(continued)
REVENUES- General Fund (Modified Accrual Basis) (thousands)
2012
2013
$2,434
$2,380
New Hanover
County
$9
$8
New Hanover
County
U.S. Government
U.S. Government
$61,808
$61,437
Other local
revenues
Other local
revenues
EXPENDITURES- General Fund (Modified Accrual Basis) (thousands)
$57
$1,189
$109
2013
Instructional
Services
System-wide
Support Services
Ancillary Services
$1,620
$52
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$91
Instructional
Services
System-wide
Support Services
Ancillary Services
$27,481
$30,351
$30,285
2012
Non-programmed
Charges
Debt Service
$30,766
Non-programmed
Charges
Debt Service
Accounting Measurements & Metrics
(continued)
CAPITAL ASSETS, net of depreciation – Governmental Activities (Full Accrual Basis) (thousands)
$9,766
$1,245
$4,085
2013
$11,867
$772
$7,968
$1,119
Land
$2,854
Non-exhaustible land improvements
2012
$11,867
$1,764
$8,503
Land
Non-exhaustible land improvements
Construction in progress
Construction in progress
Land improvements
Land improvements
Buildings and building improvements
$194,562
$9,766
Buildings and building improvements
$200,942
Vehicle fleet
Vehicle fleet
Furniture and equipment
Furniture and equipment
CAPITAL ASSETS, net of depreciation – Business Type Activities (Full Accrual Basis) (thousands)
2013
$1,252
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2012
Equipment
$1,464
Equipment
Accounting Measurements & Metrics
(continued)
$960
DEBT – Governmental Activities (Full Accrual Basis) (thousands)
2012
2013
$156
Compensated
Absences
$186
$286
Compensated
Absences
Capital Lease
Capital Lease
$9,579
$11,370
Installment
Purchase
Installment
Purchase
DEBT – Business Type Activities (Full Accrual Basis) (thousands)
2013
$308
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2012
Compensated
Absences
$240
Compensated
Absences
Accounting Measurements & Metrics
(continued)
Federal and State Program Expenditures (thousands)
2013
2012
Federal Programs
$23,624
Federal Programs
State Programs
$20,755
$134,952
$129,368
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State Programs
Contact
Michelle Thompson | Engagement Partner
mthompson@cbh.com | 919.782.1040 | www.cbh.com
Cherry Bekaert LLP
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