Single Audit Report, 2014-15

COUNTY OF SAN LUIS OBISPO SINGLE AUDIT REPORT FOR THE YEAR ENDED JUNE 30, 2015 COUNTY OF SAN LUIS OBISPO SINGLE AUDIT REPORT FOR THE YEAR ENDED JUNE 30, 2015 TABLE OF CONTENTS Page Independent Auditor’s Report 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 ................................. 1 Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 .................................................................................................... 3 Independent Auditor’s Report on Supplementary Information – Schedule of Expenditures of Federal Awards .................................................................................. 5 Schedule of Expenditures of Federal Awards .................................................................................... 6 Notes to Schedule of Expenditures of Federal Awards ..................................................................... 15 Schedule of Findings and Questioned Costs ..................................................................................... 17 Supplementary Schedule of Grant Expenditures Schedule of the Governor’s Office of Emergency Services and the Board of State and Community Corrections Grant Expenditures .................................................... 21 Aviation Passenger Facility Charges Independent Auditor’s Report on Schedule of Passenger Facility Charge Revenues and Expenses ........................................................................................ 22 Independent Auditor’s Report on Compliance with Requirements Applicable to the Passenger Facility Charge Program and on Internal Control Over Compliance ............................. 24 Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Schedule of Passenger Facility Charge Revenues and Expenses Performed in Accordance with Government Auditing Standards ................................................................................................ 26 Schedule of Passenger Facility Charge Revenues and Expenses ................................................... 28 Schedule of Current Year Findings and Questioned Costs – Airport Passenger Facility Charge Program .................................................................................... 29 Status of Prior Year Findings and Questioned Costs – Airport Passenger Facility Charge Program .................................................................................... 30 INDEPENDENT AUDITOR’S REPORT 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 Board of Supervisors County of San Luis Obispo San Luis Obispo, California We have audited, in accordance with the 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, the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of San Luis Obispo (the County), as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the County’s basic financial statements and have issued our report thereon dated February 26, 2016. Our report includes a reference to other auditors who audited the financial statements of the First 5 San Luis Obispo County, a discretely presented component unit, as described in our report on the County’s financial statements. This report does not include the results of the other auditors’ 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 In planning and performing our audit of the financial statements, we considered the County’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County’s internal control. Accordingly, we do not express an opinion on the effectiveness of the County’s internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and questioned costs, we identified a certain deficiency in internal control that we consider to be a material weakness. 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. We consider the deficiency described in the accompanying schedule of findings and questioned costs to be a material weakness: 2015-01. 1 A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. There were no significant deficiencies identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the County’s financial statements are free from 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. County’s Response to Findings The County’s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs and schedule of current year findings and questioned costs – Airport Passenger Facility Charge Program. The County’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the County’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the County’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California February 26, 2016 2 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 Board of Supervisors County of San Luis Obispo San Luis Obispo, California Report on Compliance for Each Major Federal Program We have audited the County of San Luis Obispo’s (the County) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (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, 2015. 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. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the County’s major federal programs based on our audit of the types of compliance requirements referred to above. 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 on compliance for each major federal program. However, our audit does not provide a legal determination of the County’s compliance. Opinion on Each Major Federal Program In our opinion, the County complied, in all material respects, with the types of 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, 2015. 3 Report on Internal Control over Compliance Management of the County is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the County’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program 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. 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. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. 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 material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California February 26, 2016 4 INDEPENDENT AUDITOR’S REPORT ON SUPPLEMENTARY INFORMATION – SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Board of Supervisors County of San Luis Obispo San Luis Obispo, California We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of San Luis Obispo (the County) as of and for the year ended June 30, 2015, which collectively comprise the County’s basic financial statements, and have issued our report thereon dated February 26, 2016, which contained unmodified opinions on those financial statements. Our audit was performed for the purpose of forming opinions on the financial statements that collectively comprise the County’s basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. This report is intended solely for the information and use of the County Board of Supervisors and management of the County as well as the County’s 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. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California February 26, 2016 5 COUNTY OF SAN LUIS OBISPO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 FEDERAL 2014-15 CFDA REVENUE 2014-15 Federal Grantor/Pass-Through Granter/Program Title NUMBER RECOGNIZED EXPENDITURES U.S. DEPARTMENT OF AGRICULTURE Direct Programs: Water and Waste Disposal Program - Loan 10.760 $ 104,970 $ 104,970 Water and Waste Disposal Program - Loan - Prior Year Adjustment 10.760 126,278 126,278 Water and Waste Disposal Program (Loan) 10.781 4,634,711 4,634,711 Water and Waste Disposal Program (Grant) 10.781 3,016,989 3,016,989 Subtotal Water and Waste Disposal Program Cluster 7,882,948 7,882,948 Emergency Community Water Assistance 10.763 207,800 - Emergency Community Water Assistance 10.763 - 207,800 Subtotal Direct CFDA 10.763 8,090,748 8,090,748 Passed through State Department of Health Care Services: Women Infant Children Nutrition Program 10.557 1,195,204 1,195,204 Women Infant Children Nutrition Program - Prior Year Adjustment 10.557 38,350 38,350 Subtotal Pass-Through CFDA 10.557 1,233,554 1,233,554 Passed through California Fire Safe Council: Volunteer Fire Assistance Program - Prior Year Adjustment 10.664 (236) (236) Subtotal Pass-Through CFDA 10.664 (236) (236) Passed through State Department of Food and Agriculture: Sudden Oak Death - Prior Year Adjustment 10.025 (1) (1) Glassy-Winged Sharpshooter 10.025 345,618 345,618 Asian Citrus Psyllid Detection 10.025 298,634 298,634 Asian Citrus Psyllid Detection - Prior Year Adjustment 10.025 32,536 32,536 European Grape Vine Moth 10.025 8,086 8,086 European Grape Vine Moth - Prior Year Adjustment 10.025 1 1 Light Brown Apple Moth Detection 10.025 14,963 14,963 Light Brown Apple Moth Regulatory 10.025 113,538 113,538 Light Brown Apple Moth Regulatory - Prior Year Adjustment 10.025 (627) (627) Pest Detection Trapping 10.025 175,456 175,456 Subtotal Pass-Through CFDA 10.025 988,204 988,204 Passed through State Department of Public Health: Supplemental Nutrition Assistance Program Education (SNAP-ED) 10.561 518,423 518,423 Supplemental Nutrition Assistance Program Education (SNAP-ED) - Prior Year Adjustment 10.561 6,467 6,467 CalFresh and CalFresh Employment Training 10.561 3,672,839 3,672,839 CalFresh and CalFresh Employment Training - Prior Year Adjustment 10.561 99,118 99,118 Subtotal Pass-Through CFDA 10.561 4,296,847 4,296,847 Total U.S. Department of Agriculture 14,609,117 14,609,117 See accompanying notes to schedule of expenditures of federal awards and independent auditor’s report on compliance for each major program and on internal control over compliance required by OMB Circular A-133. 6 COUNTY OF SAN LUIS OBISPO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE FISCAL YEAR ENDED JUNE 30, 2015 FEDERAL 2014-15 CFDA REVENUE 2014-15 Federal Grantor/Pass-Through Granter/Program Title NUMBER RECOGNIZED EXPENDITURES U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Direct Programs: Low Income Housing Assistance Community Development Block Grants Community Development Block Grants 14.218 85,130 85,130 Community Development Block Grants 14.218 9,862 9,862 Community Development Block Grants 14.218 (15,556) (15,556) Community Development Block Grants 14.218 - 62,965 Community Development Block Grants 14.218 314,701 251,736 Community Development Block Grants 14.218 17,680 17,680 Community Development Block Grants 14.218 199,105 199,105 Community Development Block Grants 14.218 - 80,000 Community Development Block Grants 14.218 609,760 529,760 Community Development Block Grants - 3rd Party Loans 14.218 - 2,466,617 Subtotal CFDA 14.218 1,220,682 3,687,299 Emergency Solutions Grant Program 14.231 3,698 3,698 Emergency Solutions Grant Program 14.231 94 94 Emergency Solutions Grant Program 14.231 44,627 44,627 Emergency Solutions Grant Program 14.231 119,721 119,721 Subtotal CFDA 14.231 168,140 168,140 Home Partnership Investment Program 14.239 11,486 11,486 Home Partnership Investment Program 14.239 751,800 751,800 Home Partnership Investment Program 14.239 566,676 566,676 Home Partnership Investment Program 14.239 28,449 28,449 Home Partnership Investment Program 14.239 184,505 184,505 Home Partnership Investment Program 14.239 71,738 71,738 Home Partnership Investment Program - 3rd Party Loans 14.239 - 14,144,983 Subtotal CFDA 14.239 1,614,654 15,759,637 Continuum of Care Program 14.267 260,253 260,253 Continuum of Care Program 14.267 694,408 694,408 Subtotal CFDA 14.267 954,661 954,661 Total U.S. Department of Housing and Urban Development 3,958,137 20,569,737 U.S. DEPARTMENT OF THE INTERIOR Direct Programs: Coastal Impact Assistance Program 15.668 107,215 107,215 Subtotal Direct CFDA 15.668 107,215 107,215 Passed through California Bureau of Land Management: Taylor Grazing Act 15.227 - 1,750 Taylor Grazing Act 15.227 3,673 - Subtotal Pass-Through CFDA 15.227 3,673 1,750 Total U.S. Department of Interior 110,888 108,965 See accompanying notes to schedule of expenditures of federal awards and independent auditor’s report on compliance for each major program and on internal control over compliance required by OMB Circular A-133. 7 COUNTY OF SAN LUIS OBISPO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE FISCAL YEAR ENDED JUNE 30, 2015 FEDERAL 2014-15 CFDA REVENUE 2014-15 Federal Grantor/Pass-Through Granter/Program Title NUMBER RECOGNIZED EXPENDITURES U.S. DEPARTMENT OF JUSTICE Direct Programs: Public Safety Partnership and Community Policing Grants: Bureau of Immigration and Customs Enforcement 16.710 61,000 61,000 State Criminal Alien Assistance Program 16.606 126,830 126,830 Federal Asset Forfeiture 16.000 174,142 174,142 Drug Enforcement Agency Domestic Cannabis Eradication and Suppression Program 16.001 62,151 62,151 Organized Crime Drug Enforcement Task Forces 16.111 4,690 4,690 Justice Assistance Grant 16.738 16,443 16,443 Subtotal Direct Department of Justice Grants 445,256 445,256 Passed through California Emergency Management Agency: Victim Witness Assistance 16.575 97,728 97,728 Unserved/Underserved Victim Advocacy and Outreach 16.582 131,048 131,048 Subtotal Pass-Through California Emergency Management Agency 228,776 228,776 Total U.S. Department of Justice 674,032 674,032 U.S. DEPARTMENT OF LABOR Passed through California Employment Development Department: Workforce Investment Act - Adult 17.258 749,913 749,913 Workforce Investment Act - Youth 17.259 810,386 810,386 Workforce Investment Act - Dislocated Worker and Rapid Response 17.278 561,014 561,014 Workforce Investment Act - National Emergency Grants - Prior Year Adjustment 17.277 21 21 Subtotal Pass-Through WIA Cluster 2,121,334 2,121,334 Total U.S. Department of Labor 2,121,334 2,121,334 U.S. DEPARTMENT OF TRANSPORTATION Direct Programs: Airport Improvement Program 20.106 93,255 93,255 Airport Improvement Program 20.106 220,071 220,071 Airport Improvement Program - Prior Year Adjustment 20.106 22,812 22,812 Airport Improvement Program 20.106 26,340 26,340 Airport Improvement Program - Prior Year Adjustment 20.106 2,538 2,538 Subtotal Direct CFDA 20.106 365,016 365,016 See accompanying notes to schedule of expenditures of federal awards and independent auditor’s report on compliance for each major program and on internal control over compliance required by OMB Circular A-133. 8 COUNTY OF SAN LUIS OBISPO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE FISCAL YEAR ENDED JUNE 30, 2015 FEDERAL 2014-15 CFDA REVENUE 2014-15 Federal Grantor/Pass-Through Granter/Program Title NUMBER RECOGNIZED EXPENDITURES U.S. DEPARTMENT OF TRANSPORTATION (Continued) Passed through State Department of Transportation: Public Ways and Facilities 20.205 618,831 618,831 Public Ways and Facilities - Prior Year Adjustment 20.205 (7) (7) Public Ways and Facilities - Prior Year Adjustment 20.205 (2,866) (2,866) Public Ways and Facilities 20.205 54,602 54,602 Public Ways and Facilities 20.205 20,125 20,125 Public Ways and Facilities 20.205 620,226 620,226 Public Ways and Facilities - Prior Year Adjustment 20.205 22,943 22,943 Public Ways and Facilities 20.205 178,992 178,992 Public Ways and Facilities 20.205 77,548 77,548 Public Ways and Facilities - Prior Year Adjustment 20.205 (513) (513) Public Ways and Facilities 20.205 19,639 19,639 Public Ways and Facilities 20.205 8,743 8,743 Public Ways and Facilities 20.205 9,774 9,774 Public Ways and Facilities 20.205 2,340,299 2,340,299 Public Ways and Facilities - Prior Year Adjustment 20.205 (114,728) (114,728) Public Ways and Facilities 20.205 759,727 759,727 Public Ways and Facilities 20.205 36,334 36,334 Public Ways and Facilities 20.205 149,845 149,845 Public Ways and Facilities 20.205 134,680 134,680 Public Ways and Facilities 20.205 18,668 18,668 Public Ways and Facilities - Prior Year Adjustment 20.205 1,212 1,212 Public Ways and Facilities 20.205 137,891 137,891 Public Ways and Facilities 20.205 188,916 188,916 Public Ways and Facilities 20.205 67,374 67,374 Safe Accountable Flexible Efficient Transportation Act (SAFETEA-LU) 20.205 34,243 34,243 Public Ways and Facilities - Prior Year Adjustment 20.205 25,890 25,890 Highway Planning and Construction 20.205 8,746 8,746 Public Ways and Facilities 20.205 106,935 106,935 Federal Transportation Improvement Program 20.205 88,811 88,811 Public Ways and Facilities 20.205 231,816 231,816 Subtotal CFDA Number 20.205 5,844,696 5,844,696 Office of Traffic Safety 20.600 1,592 1,592 Office of Traffic Safety - Prior Year Revenue 20.600 (101) (101) Office of Traffic Safety 20.600 42,900 42,900 Office of Traffic Safety 20.616 8,573 8,573 Office of Traffic Safety - Prior Year Adjustment 20.616 (1,309) (1,309) Office of Traffic Safety 20.616 63,496 63,496 Subtotal Highway Safety Cluster 115,151 115,151 California Office of Safety 20.608 183,469 183,469 California Office of Safety - Prior Year Adjustment 20.608 15,534 15,534 Office of Traffic Safety 20.608 19,581 19,581 Office of Traffic Safety - Prior Year Adjustment 20.608 7 7 Subtotal CFDA 20.608 218,591 218,591 Safe States Alliance Pedestrian Project 20.614 575 575 Total U.S. Department of Transportation 6,544,029 6,544,029 See accompanying notes to schedule of expenditures of federal awards and independent auditor’s report on compliance for each major program and on internal control over compliance required by OMB Circular A-133. 9 COUNTY OF SAN LUIS OBISPO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE FISCAL YEAR ENDED JUNE 30, 2015 FEDERAL 2014-15 CFDA REVENUE 2014-15 Federal Grantor/Pass-Through Granter/Program Title NUMBER RECOGNIZED EXPENDITURES ENVIRONMENTAL PROTECTION AGENCY Passed through State Water Resource Control Board: State Revolving Fund Loan - Assessment Backed 66.458 6,749,074 6,749,074 State Revolving Fund Loan - Rates and Charges 66.458 7,500,000 7,500,000 Subtotal CFDA 66.458 14,249,074 14,249,074 Public Beach Safety Grant 66.472 14,036 14,036 Subtotal Pass-Through 14,263,110 14,263,110 Total Environmental Protection Agency 14,263,110 14,263,110 U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Direct Programs: Area Agency on Aging 93.043 6,517 6,517 Area Agency on Aging - Prior Year Adjustment 93.043 2,658 2,658 Subtotal CFDA 93.043 9,175 9,175 Health Resources Services Administration - University of Pacific Oral Health 93.236 5,587 5,587 Health Resources Services Administration - University of Pacific Oral Health - Prior Year Adjustment 93.236 471 471 Subtotal CFDA 93.236 6,058 6,058 Behavioral Health Treatment Court Collaborative 93.243 208,074 208,074 Adult Treatment Drug Court Collaborative 93.243 74,353 74,353 Adult Treatment Drug Court Collaborative - Prior Year Adjustment 93.243 51 51 Family Drug Court 93.243 309,029 309,029 Treatment for Children Affected by Methamphetamine 93.243 191,342 191,342 Treatment for Children Affected by Methamphetamine - Prior Year Adjustment 93.243 1 1 Subtotal CFDA 93.243 782,850 782,850 Drug Free Community Support Program - Drug Free Campus Cal Poly 93.276 28,052 28,052 Drug Free Community Support Program - Drug Free Campus Cal Poly - Prior Year Adjustment 93.276 1 1 Subtotal CFDA 93.276 28,053 28,053 Passed through State Department of Alcohol and Drug Programs: Substance Abuse Prevention and Treatment Block Grant - Discretionary Funds 93.959 988,463 988,463 Substance Abuse Prevention and Treatment Block Grant - Discretionary Funds - Prior Year Adjustment 93.959 1,237 1,237 Substance Abuse Prevention and Treatment Block Grant - HIV Set-Aside Funds 93.959 318,796 318,796 Substance Abuse Prevention and Treatment Block Grant - Adult and YouthTX Discretionary Treatment 93.959 177,123 177,123 Substance Abuse Prevention and Treatment Block Grant - Friday Night/Club 93.959 30,000 30,000 Substance Abuse Prevention and Treatment Block Grant - HIV Set-Aside 93.959 29,266 29,266 Substance Abuse Prevention and Treatment Block Grant - Perinatal Set-Aside 93.959 72,201 72,201 Subtotal Pass-Through CFDA 93.959 1,617,086 1,617,086 Passed through State Department of Child Support Services: Child Support Enforcement: Child Support Administration 93.563 2,758,074 2,758,074 Child Support Electronic Data Processing 93.563 133,765 133,765 Subtotal Pass-Through CFDA 93.563 2,891,839 2,891,839 See accompanying notes to schedule of expenditures of federal awards and independent auditor’s report on compliance for each major program and on internal control over compliance required by OMB Circular A-133. 10 COUNTY OF SAN LUIS OBISPO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE FISCAL YEAR ENDED JUNE 30, 2015 FEDERAL 2014-15 CFDA REVENUE 2014-15 Federal Grantor/Pass-Through Granter/Program Title NUMBER RECOGNIZED EXPENDITURES U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES (Continued) Passed Through National Association of County and City Health Officials: Medical Reserve Corps Small Grant Program 93.008 2,702 2,702 Subtotal Pass-Through CFDA 93.008 2,702 2,702 Passed Through California Family Health Council: Title X - 2015 93.217 55,673 55,673 Title X 93.217 61,115 61,115 Title X - Prior Year Adjustment 93.217 18,124 18,124 Subtotal Pass-Through CFDA 93.217 134,912 134,912 Health Resources Services Administration HPP 93.074 195,508 195,508 Health Resources Services Admin - Prior Year Adjustment 93.074 33,859 33,859 Center for Disease Control Base Public Health Emergency Preparedness 93.074 542,379 542,379 Center for Disease Control Base Public Health Emergency Preparedness - Prior Year Adjustment 93.074 397 397 Subtotal CFDA 93.074 772,143 772,143 Tuberculosis Control Branch/Real Time Allotment 93.116 8,739 8,739 Tuberculosis Control Branch/Real Time Allotment - Prior Year Adjustment 93.116 1,561 1,561 Subtotal CFDA 93.116 10,300 10,300 Lead Program 93.197 13,317 13,317 Lead Program - Prior Year Adjustment 93.197 4,016 4,016 Subtotal CFDA 93.197 17,333 17,333 Immunization Action Plan 93.268 92,650 92,650 Immunization Information System - Prior Year Adjustment 93.268 (267) (267) Subtotal CFDA 93.268 92,383 92,383 California 4 Health 93.531 8,259 8,259 California 4 Health - Prior Year Adjustment 93.531 32 32 Subtotal CFDA 93.531 8,291 8,291 HIV/AIDS Surveillance Program 93.917 36,088 36,088 HIV/AIDS Surveillance Program - Prior Period Adjustment 93.917 5,763 5,763 Subtotal CFDA 93.917 41,851 41,851 See accompanying notes to schedule of expenditures of federal awards and independent auditor’s report on compliance for each major program and on internal control over compliance required by OMB Circular A-133. 11 COUNTY OF SAN LUIS OBISPO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE FISCAL YEAR ENDED JUNE 30, 2015 FEDERAL 2014-15 CFDA REVENUE 2014-15 Federal Grantor/Pass-Through Granter/Program Title NUMBER RECOGNIZED EXPENDITURES U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES (Continued) Passed Through California Family Health Council (Continued): Sexually Transmitted Diseases Control Branch Sexually Transmitted Diseases Community Intervention Program 93.977 8,076 8,076 Sexually Transmitted Diseases Community Intervention Program - Prior Year Adjustment 93.977 284 284 Subtotal CFDA 93.977 8,360 8,360 Maternal Child Health (MCH) 93.994 398,863 398,863 Maternal Child Health (MCH) - Prior Year Adjustment 93.994 (28,637) (28,637) Subtotal CFDA 93.994 370,226 370,226 Subtotal Pass-Through 1,320,887 1,320,887 Passed Through Medical Assistance Program: Medi-Cal Administration 93.778 327,803 327,803 Medi-Cal Administration - Prior Year Adjustment 93.778 76,930 76,930 School Based Medi-Cal Administration 93.778 132,576 132,576 School Based Medi-Cal Administration - Prior Year Adjustment 93.778 389,656 389,656 Medi-Cal Administration - Targeted Case Management 93.778 449,435 449,435 Medi-Cal Administration - Targeted Case Management - Prior Year Adjustment 93.778 (61,655) (61,655) Administration: Medi-Cal 93.778 74,163 74,163 Medical Outreach and Enrollment 93.778 21,763 21,763 Administration: Medi-Cal - Prior Year Adjustment 93.778 71,809 71,809 Foster Care 93.778 100,940 100,940 Child Health and Disability Prevention 93.778 181,555 181,555 Child Health and Disability Prevention - Prior Year Adjustment 93.778 431 431 Children Services 93.778 656,129 656,129 Children Services - Prior Year Adjustment 93.778 2,450 2,450 Administration: Medi-Cal - Public Authority for In Home Support Services 93.778 7,353,588 7,353,588 Medi-Cal Administration 93.778 110,679 110,679 Medi-Cal Administration - Prior Year Adjustment 93.778 1 1 Subtotal CFDA 93.778 9,888,253 9,888,253 Maternal, Child, and Adolescent Oral Health 93.991 33,875 33,875 Maternal, Child, and Adolescent Oral Health - Prior Year Adjustment 93.991 16,125 16,125 Subtotal CFDA 93.991 50,000 50,000 Mental Health - Substance Abuse and Mental Health Services Administration 93.958 351,443 351,443 Mental Health - Substance Abuse and Mental Health Services Administration - Prior Year Adjustment 93.958 (25,595) (25,595) Mental Health - Substance Abuse and Mental Health Services Administration - Prior Year Adjustment 93.958 1 1 Mental Health - Substance Abuse and Mental Health Services Administration 93.958 139,581 139,320 Subtotal CFDA 93.958 465,430 465,169 Subtotal Pass-Through 10,403,683 10,403,422 See accompanying notes to schedule of expenditures of federal awards and independent auditor’s report on compliance for each major program and on internal control over compliance required by OMB Circular A-133. 12 COUNTY OF SAN LUIS OBISPO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE FISCAL YEAR ENDED JUNE 30, 2015 FEDERAL 2014-15 CFDA REVENUE 2014-15 Federal Grantor/Pass-Through Granter/Program Title NUMBER RECOGNIZED EXPENDITURES U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES (Continued) Passed through State Department of Mental Health: Mental Health - McKinney Assistance in Transition from Homelessness 93.150 22,784 22,784 Subtotal Pass-Through CFDA 93.150 22,784 22,784 Passed through State Department of Social Services: Kinship Guardian Assistance Program 93.090 220,696 220,696 Kinship Guardian Assistance Program 93.090 3,109 3,109 Subtotal CFDA 93.090 223,805 223,805 Promoting Safe and Stable Families 93.556 169,371 169,371 Subtotal CFDA 93.556 169,371 169,371 Refugee Cash Assistance 93.566 2,727 2,727 Subtotal CFDA 93.566 2,727 2,727 Temporary Assistance for Needy Families: Assistance : CALWORKS 93.558 4,156,764 4,156,764 Administration: CalWORKS, Statewide Automated Welfare System - CalWIN, TANF 93.558 11,366,378 11,366,378 Administration: CalWORKS, Statewide Automated Welfare System - CalWIN, TANF - Prior Year Adjustment 93.558 (238,348) (238,348) Subtotal CFDA 93.558 15,284,794 15,284,794 Foster Care - Title IV-E Administration: Probation - Title IV E 93.658 448,747 448,747 Child Welfare Services - Title IV E 93.658 3,728,192 3,728,192 Child Welfare Services - Title IV E - Prior Year Adjustment 93.658 4,147 4,147 Assistance: Foster Care 93.658 2,343,659 2,343,659 Subtotal CFDA 93.658 6,524,745 6,524,745 Child Welfare Services Title IV-B 93.645 188,415 188,415 Administration: Adoption 93.659 850,743 850,743 Administration: Adoption - Prior Year Adjustment 93.659 798 798 Assistance: Adoption 93.659 3,605,217 3,605,217 Subtotal CFDA 93.659 4,456,758 4,456,758 Foster Care Assistance - Title XX 93.667 162,387 162,387 Child Welfare Services - Title XX 93.667 566,144 566,144 Subtotal CFDA 93.667 728,531 728,531 Independent Living Program 93.674 116,006 116,006 Independent Living Program - Prior Year Adjustment 93.674 724 724 Subtotal CFDA 93.674 116,730 116,730 Subtotal Pass-Through 27,695,876 27,695,876 Subtotal Pass-Through Programs 44,089,769 44,089,508 Total U.S. Department of Health and Human Services 44,915,905 44,915,644 See accompanying notes to schedule of expenditures of federal awards and independent auditor’s report on compliance for each major program and on internal control over compliance required by OMB Circular A-133. 13 COUNTY OF SAN LUIS OBISPO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE FISCAL YEAR ENDED JUNE 30, 2015 FEDERAL 2014-15 CFDA REVENUE 2014-15 Federal Grantor/Pass-Through Granter/Program Title NUMBER RECOGNIZED EXPENDITURES DEPARTMENT OF HOMELAND SECURITY Passed through California Department of Boating and Waterways: Non Motorized Boating Access Development Grant 97.012 38,835 38,835 Non Motorized Boating Access Development Grant - Prior Year Adjustment 97.012 (10,261) (10,261) Non Motorized Boating Access Development Grant - Prior Year Adjustment 97.012 (31,369) (31,369) Subtotal Pass-Through CFDA 97.012 (2,795) (2,795) Hazard Mitigation Grants: FY 11 Pre-Disaster Mitigation Grant Program - Prior Year Adjustment 97.047 1,286 1,286 Subtotal CFDA 97.047 1,286 1,286 Emergency Management Performance Grants: Emergency Management Performance 2013 - Prior Year Adjustment 97.042 (2,503) (2,503) Emergency Management Performance 2014 97.042 78,571 78,571 Subtotal CFDA 97.042 76,068 76,068 Homeland Security - Prior Year Adjustment 97.067 6,057 6,057 Homeland Security - Prior Year Adjustment 97.067 343 343 Homeland Security 97.067 14,577 14,577 Homeland Security - Prior Year Adjustment 97.067 (389) (389) Homeland Security 97.067 149,975 149,975 Homeland Security 97.067 593,475 593,475 Homeland Security - Prior Year Adjustment 97.067 115,503 115,503 Homeland Security 97.067 33,500 33,500 Homeland Security - Prior Year Adjustment 97.067 (1,281) (1,281) Homeland Security 97.067 12,387 12,387 Homeland Security 97.067 13,451 13,451 Homeland Security - Prior Year Adjustment 97.067 1,684 1,684 Homeland Security 97.067 36,083 36,083 Homeland Security 97.067 135,000 135,000 Homeland Security 97.067 3,714 3,714 Homeland Security 97.067 28,887 28,887 Subtotal CFDA 97.067 1,142,966 1,142,966 Subtotal Pass-Through 1,220,320 1,220,320 Subtotal Pass-Throughs 1,217,525 1,217,525 Total Department of Homeland Security 1,217,525 1,217,525 TOTAL FEDERAL FINANCIAL ASSISTANCE $ 88,414,077 $ 105,023,493 See accompanying notes to schedule of expenditures of federal awards and independent auditor’s report on compliance for each major program and on internal control over compliance required by OMB Circular A-133. 14 COUNTY OF SAN LUIS OBISPO NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2015 NOTE 1 – REPORTING ENTITY The accompanying Schedule of Expenditures of Federal Awards (SEFA) presents the activity of all federal awards programs of the County of San Luis Obispo (County). The County’s reporting entity is defined in Note 1 to the County’s basic financial statements. All federal awards received directly from federal agencies as well as federal awards passed through other government agencies are included in the schedule. NOTE 2 – BASIS OF ACCOUNTING The accompanying SEFA is presented using the modified accrual basis of accounting for program expenditures accounted for in governmental funds and the accrual basis of accounting for expenditures accounted for in proprietary funds, as described in Note 1 of the County’s basic financial statements. NOTE 3 – RELATIONSHIP TO FINANCIAL STATEMENTS The amounts reported in the accompanying SEFA agree, in all material respects, to amounts reported within the County’s financial statements. Federal award revenues are reported principally in the County’s financial statements as intergovernmental revenues in the General and Special Revenue funds. NOTE 4 – SUBRECIPIENTS Of the federal expenditures presented in the SEFA, the County provided federal awards to subrecipients as follows: CFDA Number Program Title Amount 10.561 Supplemental Nutrition Assistance $ 150,885 93.150 Steward McKinny Projects (PATH Grant) 22,784 14.218 Community Development Block Grant/Entitlement Grants 935,051 14.231 Emergency Solutions Grant Program 163,059 14.235 Supportive Housing Program - 14.239 Home Investment Partnerships Program 1,556,088 14.267 Continuum of Care 920,942 15.227 Taylor Grazing Act 1,750 17.258 Workforce Investment Act - Adult 500,895 17.259 Workforce Investment Act - Youth 612,899 17.278 Workforce Investment Act - Dislocated Worker/Rapid Response 405,345 15 NOTE 5 – LOANS WITH CONTINUING COMPLIANCE REQUIREMENT Outstanding federally-funded program loans with a continuing compliance requirement had the following balances during the year: Amount Outstanding CFDA Number Program Title July 1, 2014 New Loans Loan Payments June 30, 2015 14.218 Community Development Block Grant/Entitlement Grants $ 2,469,117 $ - $ (2,500) $ 2,466,617 14.239 Home Investment Partnerships Program 13,646,436 750,000 (251,453) 14,144,983 NOTE 6 – OTHER LOANS Outstanding federally-funded program loans had the following balances during the year: Amount Outstanding CFDA Number Program Title June 30, 2015 10.760, 10.781 Water and Waste Program Cluster $ 79,828,924 66.458 State Revolving Fund 49,944,994 * 10.760 Water and Waste Program Cluster 1,247,420 * This amount includes federal and state funds. NOTE 7 – PASS-THROUGH ENTITIES’ IDENTIFYING NUMBERS When federal awards are received from a pass-through entity, the SEFA shows, if available, the identifying number assigned by the pass-through entity. When no identifying number is shown, the County determined that no identifying number is assigned for the program or the County was unable to obtain an identifying number from the pass-through entity. NOTE 8 – TOTAL FEDERAL AWARDS EXPENDED BY CFDA NUMBER When there is more than one program under a single CFDA number, the SEFA totals all programs under the one CFDA number. Occasionally, however, this total could not be conveniently displayed because all programs under one CFDA number were not contiguous. When this occurred, this total is not shown in the SEFA, but instead is provided below: Total Federal CFDA Number Expenditures 10.760 $ 231,248 10.781 7,651,700 20.600 44,391 20.616 70,760 16 COUNTY OF SAN LUIS OBISPO SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2015 SECTION I – SUMMARY OF AUDITOR’S RESULTS Financial Statements Type of auditor’s report issued: Unmodified Internal control over financial reporting: Material weakness identified? X Yes No Significant deficiencies identified that are not considered to be material weaknesses? Yes X None Reported Noncompliance material to financial statements noted? Yes X No Federal Awards Type of auditor’s report issued on compliance for major programs: Unmodified Internal control over major federal programs: Material weakness identified? Yes X No Significant deficiencies identified that are not considered to be material weaknesses? Yes X None reported Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133, Section .510(a)? Yes X No Identification of major programs: CFDA #(s) Name of Federal Program or Cluster 10.760 and 10.781 Water and Waste Disposal Program Cluster 14.218 Community Development Block Grants 14.239 Home Partnership Investment Program 93.563 Child Support Enforcement 93.658 Foster Care Program 93.778 Medical Assistance Program The threshold for distinguishing type A and B programs was $3,000,000. Auditee qualified as low-risk auditee? X Yes No 17 SECTION II – FINANCIAL STATEMENT FINDINGS 2015-01: Debt Accretion Criteria: In accordance with Government Auditing Standards, internal controls should be designed to provide reasonable assurance of achieving effective and efficient operations, reliable financial and performance reporting, or compliance with applicable laws and regulations in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). Condition: During our audit procedures over long-term debt, it was noted the County of San Luis Obispo (the County) did not include the accreted value of the 2003 Capital Appreciation Bonds through June 30, 2015. The 2003 Series C Bonds will begin to mature on September 1, 2018, and each year thereafter until 2030. Each bond should accrete (increase) in value from the date of issuance until maturity. In accordance with the “Table of Accreted Values” in the official bond statement of the 2003 Capital Appreciation Bonds, we noted the County did not report $35,486,164 in prior year accretion and $4,528,978 in current year accretion. Cause of Condition: Per discussion with the client, the County had not previously issued debt instruments where interest is not paid until maturity and was therefore not familiar with unique accounting procedures necessary to record the accreted value component of these bonds. The County management has been aware of the accretion in value and has identified the full obligation of the bonds in debt presentations before the Board of Supervisors in a public setting. The County also has reported the full amount of debt service to maturity in the notes to the financial statements each year since inception of the bonds. However, due to the lack of familiarity with this unique type of bond, the County applied the same accounting procedures to them as used for conventional debt instruments with interest payable each year, which would have resulted in the accreted value being reporting in the Statement of Net Position in the year payable rather than as it accretes over time as required under U.S. GAAP. Effect: Failing to record the accreted value of long-term debt could misrepresent the financial state of the County in any given year and could result in the financial statements being materially misstated, thus not being in compliance with U.S. GAAP reporting requirements. Recommendation: We recommend the County adjust the outstanding balance for the 2003 Series C Capital Appreciation Bonds to include the accumulated accretion for all bonds as of June 30, 2015. In addition, we recommend the County implement the proper internal control procedures to record the full balance of outstanding debt, including accretion, for future years. Management Response/Corrective Action Plan: The County agrees with the finding and has recorded the correct accreted values through June 30, 2015, and has calculated the amounts to record for each fiscal year thereafter through maturity. 18 SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS There were no findings identified in fiscal year ending June 30, 2015, that require reporting in accordance with Government Auditing Standards. 19 SECTION IV – STATUS OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS 2014-001: Receivables Cutoff Criteria: County policies and procedures should ensure year-end accruals are properly identified and recorded for all account balances, including revenues and receivables, during the year-end closing process. Condition: During our audit, we noted two significant receipts in the capital projects fund for State aid that were recognized in Fiscal Year 2014-15, but should have been accrued to 2013-14 since they were reimbursements for Fiscal Year 2013-14 project expenditures. The amount of the audit adjustment was $3.3 million. Cause: The County has procedures designed to review payments received early in the new fiscal year to determine if accrual to the prior fiscal year is appropriate. One of these procedures was overlooked resulting in failure to recognize a receivable and revenue for the two noted receipts in the correct fiscal year. Effect of Condition: Prior to the audit adjustment intergovernmental revenue and committed fund balance was understated by $3.3 million in the capital projects fund at June 30, 2014. The amounts were corrected by audit adjustment. Recommendation: To ensure proper revenue recognition, we recommend that the County review all significant deposits received after the June 30 cutoff to ensure revenue is recorded in the proper accounting period. Management Response: Management agrees with the recommendation and will more closely monitor the performance of year-end review procedures. Current Year Status: Implemented. 20 SUPPLEMENTARY SCHEDULE OF GRANT EXPENDITURES COUNTY OF SAN LUIS OBISPO SCHEDULE OF THE GOVERNOR’S OFFICE OF EMERGENCY SERVICES AND THE BOARD OF STATE AND COMMUNITY CORRECTIONS GRANT EXPENDITURES FOR THE YEAR ENDED JUNE 30, 2015 Share of Expenditures Expenditures Claimed Current Year For the Period For the Year Cumulative Through Ended As of Federal State County Program June 30, 2014 June 30, 2015 June 30, 2015 Share Share Share Victim Witness Assistance - VW13320400 Personnel Services $ 909,154 $ 270,365 $ 1,179,519 $ 97,728 $ 104,546 $ 68,091 Totals $ 909,154 $ 270,365 $ 1,179,519 $ 97,728 $ 104,546 $ 68,091 Unserved/Underserved Victim Advocacy and Outreach - UV13040400 Personnel Services $ 594,145 $ 164,150 $ 758,295 $ 131,048 $ - $ 33,102 Totals $ 594,145 $ 164,150 $ 758,295 $ 131,048 $ - $ 33,102 Organization Crime Drug TF - 245C-LA- 3442203 Personnel Services $ - $ 5,194 $ 5,194 $ 4,690 $ - $ 504 Totals $ - $ 5,194 $ 5,194 $ 4,690 $ - $ 504 Aftercare Treatment Services - AF11 01 0400 Operating Expenses $ 249,891 $ 109,414 $ 359,305 $ 109,414 $ - $ - Totals $ 249,891 $ 109,414 $ 359,305 $ 109,414 $ - $ - Justice Assistance Grant - Anti-Drug Abuse Enforcement Team Program - BSCC 626-13 Personnel Services $ 209,874 $ 57,863 $ 267,737 $ - $ 57,863 $ - Operating Expenses 88,463 64,083 152,546 - 64,083 - Totals $ 298,337 $ 121,946 $ 420,283 $ - $ 121,946 $ - 2013 Stonegarden Grant - 2013-1110 Personnel Services $ - $ 158,931 $ 158,931 $ 155,623 $ - $ 3,308 Operating Expenses - 14,229 14,229 4,400 - 9,829 Equipment 149,358 433,452 582,810 433,452 - - Totals $ 149,358 $ 606,612 $ 755,970 $ 593,475 $ - $ 13,137 21 AVIATION PASSENGER FACILITY CHARGE INDEPENDENT AUDITOR’S REPORT ON SCHEDULE OF PASSENGER FACILITY CHARGE REVENUES AND EXPENSES Board of Supervisors County of San Luis Obispo San Luis Obispo, California Report on Schedule for Each Quarterly Period We have audited the accompanying Schedule of Passenger Facility Charge Revenues and Expenses (Schedule) of the County of San Luis Obispo (County), for the annual period and each quarterly period from July 1, 2014 to June 30, 2015. Management’s Responsibility Management is responsible for the preparation and fair presentation of the Schedule in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of a financial schedule that is free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on this financial schedule based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in 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 schedule is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts in the Schedule. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Schedule, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the County’s preparation and fair presentation of the Schedule in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the County’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Schedule. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the Schedule referred to above presents fairly, in all material respects, the passenger facility charges received, held, and used by the County for the period and each quarter during the period from July 1, 2014 to June 30, 2015, as defined by the Federal Aviation Administration of the United States of America Department of Transportation. 22 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 26, 2016, on our consideration of the County’s internal control over financial reporting relating to the Schedule and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements. 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Governmental Auditing Standards in considering the County’s internal control over financial reporting and compliance relating to the Schedule. This report is intended solely for the information and use of the Board of Supervisors and the County of San Luis Obispo and is not intended to be, and should not be, used by anyone other than those specified parties. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California February 26, 2016 23 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO THE PASSENGER FACILITY CHARGE PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE Board of Supervisors County of San Luis Obispo San Luis Obispo, California Compliance We have audited the compliance of the County of San Luis Obispo (County) with the compliance requirements described in the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration (Guide), for its Passenger Facility Charge program for the period and each quarter during the period from July 1, 2014 to June 30, 2015. Compliance with the requirements of laws and regulations applicable to its Passenger Facility Charge program 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 the Guide. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a direct and material effect on the Passenger Facility Charge 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 requirements referred to above that are applicable to its Passenger Facility Charge program for the period and each quarter during the period from July 1, 2014 to June 30, 2015. However, the results of our auditing procedures disclosed an instance of noncompliance with those requirements, which is described in the accompanying schedule of current year findings and questioned costs – Airport Passenger Facility Charge program as item 2015-02. Internal Control Over Compliance The management of the County is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws and regulations applicable to the Passenger Facility Charge program. In planning and performing our audit, we considered the County’s internal control over compliance with requirements that could have a direct and material effect on the Passenger Facility Charge program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance 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 County’s internal control over compliance. 24 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 the Passenger Facility Charge program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that a material noncompliance with a type of compliance requirement of the Passenger Facility Charge 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 would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We identified a deficiency in internal controls over compliance as described in the accompanying schedule of current year findings and questioned costs – Airport Passenger Facility Charge program: 2015-02. This report is intended solely for the information of management, the Board of Supervisors, the U.S. Federal Aviation Administration, and the airline parties operating at the Airport and it is not intended to be, and should not be, used by anyone other than these specified parties. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California February 26, 2016 25 INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF THE SCHEDULE OF PASSENGER FACILITY CHARGE REVENUES AND EXPENSES PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Supervisors County of San Luis Obispo San Luis Obispo, California We have audited, in accordance with the 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, the Schedule of Passenger Facility Charge Revenues and Expenses (Schedule) of the County of San Luis Obispo (County), as of and for the year ended June 30, 2015, and have issued our report thereon dated February 26, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the Schedule, we considered the County’s internal control over financial reporting (internal control) relating to the Schedule to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the Schedule, but not for the purpose of expressing an opinion on the effectiveness of the County’s internal control relating to the Schedule. Accordingly, we do not express an opinion on the effectiveness of the County’s internal control relating to the Schedule. 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 schedule will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 26 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Schedule is free from material misstatement, we performed tests of the County’s 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 schedule 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 one instance of noncompliance or other matters that is required to be reported under Government Auditing Standards. See 2015-02. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the County's internal control or on compliance relating to the Schedule. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the County’s internal control and compliance relating to the Schedule. Accordingly, this communication is not suitable for any other purpose. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California February 26, 2016 27 COUNTY OF SAN LUIS OBISPO SCHEDULE OF PASSENGER FACILITY CHARGE REVENUES AND EXPENSES FOR THE YEAR ENDED JUNE 30, 2015 Current Year Project to Date Approved Prior Receipts Receipts Unliquidated Approved Federal Application Number/ Project Period or Revenues Interest or Revenues Interest Balance Project Description Allocation Adjustment Recognized Earned Expenditures Recognized Earned Expenditures PFC Trust 1997-04-I and 2000-06-U Revenues $ - $ 2,464,620 $ - $ 5,304 $ - $ 6,370,839 $ 449,991 $ - $ 6,820,830 Expenditures: - - - - - - - - - Approved Application #4/6 : $6,820,830 - - - - - - - - - Terminal development and construction 6,820,830 - - - 58,710 - - 3,329,258 (3,329,258) Total 4/6: 1997-04-I and 2000-06-U 6,820,830 2,464,620 - 5,304 58,710 6,370,839 449,991 3,329,258 3,491,572 99-05-C-03-SBP Revenues Expenditures: - - - - - 1,057,676 - - 1,057,676 Approved Application #5 : $1,057,676 - - - - - - - - - SLO Master Plan, EIR, Land Acquisition 1,057,676 - - - - - - 1,057,676 (1,057,676) Total 5: 99-05-C-03-SBP 1,057,676 - - - - 1,057,676 - 1,057,676 - 2002-07-C Revenues - (970,533) 583,464 - - 1,348,506 - - 1,348,506 Expenditures: - - - - - - - - - Approved Application #7: $1,730,271 1,730,271 - - - - - - 1,730,271 (1,730,271) Total 7: 1997-04-I and 2000-06-U 1,730,271 (970,533) 583,464 - - 1,348,506 - 1,730,271 (381,765) 2007-08-C Revenues - (1,494,087) - - - - - - - Expenditures: - - - - - - - - - Approved Application #8: $2,028,190 2,028,190 - - - - - - 1,328,771 (1,328,771) Total 8: 1997-04-I and 2000-06-U 2,028,190 (1,494,087) - - - - - 1,328,771 (1,328,771) Total Passenger Facility Charges $ 11,636,967 $ - $ 583,464 $ 5,304 $ 58,710 $ 8,777,021 $ 449,991 $ 7,445,976 $ 1,781,036 28 COUNTY OF SAN LUIS OBISPO SCHEDULE OF CURRENT YEAR FINDINGS AND QUESTIONED COSTS – AIRPORT PASSENGER FACILITY CHARGE PROGRAM 2015-02: Criteria: Passenger Facility Charge Audit Guide For Public Agencies Section 158.63 requires that the public agency provide quarterly reports to carriers collecting Airport Passenger Facility Charge (PFC) revenues for the public agency, with a copy to the appropriate Federal Aviation Administration (FAA) Airports office. Condition: During our review of the County of San Luis Obispo June 30, 2015 PFC Quarterly Report to the FAA, we noted that the report was submitted on October 3, 2015, which is after the one month deadline. All PFC Quarterly Reports are to be submitted on or before the last day of the calendar month following the calendar quarter or other period agreed to by the public agency and collecting carrier. Cause: The report was not submitted timely. Effect: Failure to meet the Passenger Facility Charge Audit Guide requirements could lead the County to be out of compliance with the FAA and potentially receive fines or other penalties. Recommendation: We recommend the County submit all required PFC Quarterly Reports in a timely manner. Management Response/Corrective Action Plan: Management agrees with the recommendation and corrective action was taken to ensure this does not happen in the future. 29 COUNTY OF SAN LUIS OBISPO STATUS OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS – PASSENGER FACILITY CHARGE PROGRAM There were no findings identified in fiscal year ending June 30, 2014, that require reporting in accordance with Government Auditing Standards related to the Airport PFC audit. 30