Meeting Audit Requirements 4/22/2018 Holman Frenia Allison, P.C. Meeting Audit Requirements Rodney R. Haines, CPA, RMA, PSA Principal/Shareholder July 13, 2016

Rodney R. Haines Principal/Shareholder 4/22/2018 Holman Frenia Allison, P.C. Rodney R. Haines Principal/Shareholder Email: Rhaines@hfacpas.com One of founding partners of Holman Frenia Allison, P.C. Bachelor of Science Degree in Business Administration with specialization in accounting and finance – Drexel University - 1991 Certified Public Accountant - 1994 Registered Municipal Accountant - 1997 Auditing mostly governmental and nonprofit audits since graduation in 1991. HFA currently audits more than 50 NJ county and municipal governments, 60 NJ school districts, and approximately an additional 50 fire districts and authorities.

Focus of Today’s Presentation 4/22/2018 Holman Frenia Allison, P.C. Focus of Today’s Presentation Explanation of an audit Understanding the audit process Preparing for an audit Questions

What is an audit? Various Types Financial Statement Audits 4/22/2018 Holman Frenia Allison, P.C. What is an audit? Various Types Financial Statement Audits Internal Control Audits Forensic Audits

Financial Statement Audit Required 4/22/2018 Holman Frenia Allison, P.C. Financial Statement Audit Required Required by statute - NJSA 40A:5-4 40A:5-4. The governing body of every local unit shall cause an annual audit of its books, accounts and financial transactions to be made and completed within six months after the close of its fiscal year. The governing body of every local unit may by resolution petition the Director of the Division of Local Government Services in the Department of Community Affairs for an extension to complete and file the annual audit with the division. Upon good cause being shown the director may grant an extension upon whatever terms or conditions he may deem reasonable. The determination of the director in the granting of an extension is final.  The governing body of every local unit shall employ a registered municipal accountant of New Jersey to prepare its annual audit or it shall enter into an agreement with the Director of the Division of Local Government Services for an annual audit to be made by qualified employees of the division. The director shall establish a fee based upon the time spent and other expenses incurred by qualified employees of the division when conducting the annual audit for a local unit. The local unit shall upon request for payment for audit services, forward a check to the director, payable to the State Treasurer.  Amended 1977,c.396,s.1; 1991,c.216. 

NJAC 5:30-6 Local Finance Board – Annual Audit 4/22/2018 Holman Frenia Allison, P.C. NJAC 5:30-6 Local Finance Board – Annual Audit 5:30-6.1 Uniform accounting system for local units (a) The Requirements of Audit - First established in 1962, last revision available on State’s website – 1982 (c) In addition to the Requirements of Audit, the registered municipal accountant of each local unit shall also utilize the requirements of the following authoritative resources, incorporated herein by reference, in conducting the annual audit as appropriate and applicable: Generally Accepted Auditing Standards as promulgated by the American Institute of Certified Public Accountants Government Accounting Standards Board with regard to disclosure of notes to the financial statements (updated) Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) (updated) New Jersey Office of Management and Budget Circular 15-08 Generally Accepted Government Auditing Standards issued by the Comptroller General of the United States.

Beginning of process Engagement letter Audit objectives 4/22/2018 Holman Frenia Allison, P.C. Beginning of process Engagement letter Audit objectives Audit Procedures General Internal Controls Compliance Other Services – Non attest services Assistance with preparation of financial statements and notes AFS Budgets Management Responsibilities

Financial Statement Audit Objective 4/22/2018 Holman Frenia Allison, P.C. Financial Statement Audit Objective An unbiased examination and evaluation of the financial statements of an organization. Governmental Audits are conducted in accordance with: GAAS – Generally Accepted Auditing Standards GAGAS – Generally Accepted Government Auditing Standards State laws and regulations The overall objective of an independent audit is to express an opinion on the fairness of presentation of the financial statements.

Management Responsibilities 4/22/2018 Holman Frenia Allison, P.C. Management Responsibilities Establish and maintaining effective internal controls Implementing systems designed to achieve compliance with applicable rules and regulations Selection and application of accounting principles and the preparation of financial statements Making all financial records available

Management Responsibilities – cont. 4/22/2018 Holman Frenia Allison, P.C. Management Responsibilities – cont. Adjusting financial records to correct material misstatements Designing and implementation of programs and controls to prevent and detect fraud Including informing auditors of all known and suspected fraud affecting the government involving: Management Employees who have significant roles in internal controls Others where fraud could have material effect on financial statements Allegations of fraud or suspected fraud

Management Responsibilities – cont. 4/22/2018 Holman Frenia Allison, P.C. Management Responsibilities – cont. Assume all management responsibilities relating to the financial statements and the related notes and any other non-attest services provided.

4/22/2018 Holman Frenia Allison, P.C. Audit Procedures Test evidence supporting the amounts and disclosures in the financial statements Appropriateness of accounting policies and estimates Plan and perform procedures to obtain reasonable assurance that financial statements are free of material misstatements resulting from: Errors Fraudulent financial reporting Misappropriation of assets Violations of laws or government regulations

Audit Procedures - continued 4/22/2018 Holman Frenia Allison, P.C. Audit Procedures - continued Internal Controls Gain an understanding of the government and its environment Internal controls testing procedures Sufficient to assess risk on financials Government Auditing Standards do not require testing to an extent to offer an opinion on the effectiveness of controls Compliance Testing designed and completed to determine the government complies with any applicable rules and regulations Government Auditing Standards do not require testing to an extent to offer an opinion on compliance

Preparing for the Audit 4/22/2018 Holman Frenia Allison, P.C. Preparing for the Audit General ledger complete, adjusted and up to date. Subsidiary ledgers and records are up to date and properly adjusted in the general ledger. Bank Reconciliations – completed and up to date Support for transactions organized and available for inspection and testing Cooperation with the audit team

Tax Collector – Treasurer reporting 4/22/2018 Holman Frenia Allison, P.C. Tax Collector – Treasurer reporting Communication is the key Computer systems – Do the tax collection and general ledger programs communicate and automatically update? If not – what is needed to keep general ledger up to date Does Tax Collector have separate cash bank accounts? What information is included with tax collector monthly reports? Just cash? Adjustments? What does Finance office post on a monthly basis? Just cash? Is it recorded correctly by levy year if necessary? Did the levy get posted? Were all approved tax adjustments recorded to general ledger?

4/22/2018 Holman Frenia Allison, P.C. Questions???

Rodney R. Haines, CPA, RMA, PSA 4/22/2018 Holman Frenia Allison, P.C. Thank you! Rodney R. Haines, CPA, RMA, PSA Principal/Shareholder RHaines@hfacpas.com 732.797.1333 www.hfacpas.com