REPORT OF AUDIT COUNTY OF PASSAIC STATE OF NEW JERSEY DECEMBER 31, 2008 · .... COUNTY OF PASSAIC, N.J. TABLE OF CONTENTS (continued) Exhibit Page SUPPLEMENTARY SCHEDULES CURRENT FUND A-4 Schedule of Cash and Investments 65 A-5 Schedule of Cash - Change Fund 66 A-6 Schedule of Cash - Petty Cash 66 A-7 Schedule of Federal and State Grants Receivable 67 A-8 Schedule of Revenue Accounts Receivable 72 A-9 Schedule of Interfunds 73 A-10 Schedule of Appropriation Reserves 74 A-11 Schedule of Accounts Payable 77 A-12 Schedule of Encumbrances Payable 78 A-13 Schedule of Commitments Payable 79 A-14 Schedule of Appropriated Reserves for Grants 80 A-15 Schedule of Miscellaneous Reserves 85 A-16 Schedule of Unappropriated Reserves for Grants 86 A-17 Schedule oflnterfunds 87 TRUST FUND B-2 Schedule of Cash 88 B-3 Schedule ofV arious Trust Deposits 89 B-4 Schedule of Reserve for Dedicated Trusts 90 B-5 Schedule of Open Space Trust Expenditures 91 B-6 Schedule of Open Space Grant Commitments Payable 91 B-7 Schedule of Reserve for Confiscated Trust Fund 92 B-8 Schedule of Reserve for Workmen's Compensation 93 B-9 Schedule of Reserve for Health Benefit Funds 94 B-10 Schedule of Reserve for Liability Insurance 94 B-11 Schedule of Housing Voucher Program Grants Receivable 95 B-12 Schedule of Accounts Payable 96 B-13 Reserve for Housing Voucher Program 97 B-14 Schedule oflnterfunds 98 COUNTY OF PASSAIC, N.J. TABLE OF CONTENTS (continued) Exhibit Page GENERAL CAPITAL FUND C-2 Schedule of Cash 99 C-3 Analysis of Cash 100 C-4 Schedule of Receivables 105 C-5 Schedule of Deferred Charges to Future Taxation - Funded 107 C-6 Schedule of Deferred Charges to Future Taxation - Unfunded 108 C-7 Schedule oflmprovement Authorizations 116 C-8 Schedule of Accounts Payable 122 C-9 Schedule of Commitments Payable 122 C-10 Schedule of Green Acres Loan Payable 123 C-11 Schedule of Amounts Due to the Township of Wayne 123 C-12 Schedule of Capital Improvement Fund 124 C-13 Schedule of Reserve for Final Payments and Litigation 124 C-14 Schedule of Reserve for Payment of Bonds and Notes 125 C-15 Schedule oflnterfunds 126 C-16 Schedule of Reserve for Salt Shed - West Milford 127 C-17 Schedule of Reserve for EFA State Loan Payments 127 C-18 Schedule of Reserve for Interest - Fire Academy 128 C-19 Schedule of Reserve for Administration Building Settlement 129 C-20 Schedule of Reserve for Interest - DOT Programs 129 C-21 Schedule of Reserve for Unappropriated Grants 130 C-22 Schedule of Reserve for Grants Receivable 130 C-23 Schedule of Reserve for Bonding Payments 131 C-24 Schedule of Accrued Interest Payable 131 C-25 Schedule of Bond Anticipation Notes Payable 132 C-26 Schedule of General Serial Bonds Payable 135 C-27 Schedule of State Educational Facilities Authority Loans Payable 149 C-28 Schedule ofNew Jersey Green Trust Loans Payable 150 C-29 Schedule of Capital Leases Payable 151 C-30 Schedule of Bonds and Notes Authorized But Not Issued 154 COUNTY OF PASSAIC, N.J. TABLE OF CONTENTS (continued) Exhibit PART II 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 157 Report on Compliance with Requirements Applicable to Each Major Federal and State Program and Internal Control with OMB Circular A-133 and N.J. OMB Circular 04-04 as amended 159 Schedule of Expenditures of Federal Awards 161 Schedule of Expenditures of State Awards 166 Notes to the Schedules of Expenditures of Federal and State Awards 172 Schedule of Findings and Questioned Costs 173 General Comments 178 Recommendations 181 Status of Prior Years' Audit Findings/Recommendations 182 COUNTY OF PASSAIC STATE OF NEW JERSEY ******** PART I REPORT OF AUDIT ON FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2008 Ferraioli, Wielkotz, Cerullo & Cuva, P.A. Charles J. Ferraioli, Jr., MBA, CPA, RMA Certified Public Accountants Newton Office Steven D. Wielkotz, CPA, RMA 401 Wanaque Avenue 1OOB Main Street James J. Cerullo, CPA, RMA Pompton Lakes, New Jersey 07442 Newton, N.J. 07860 Paul J. Cuva, CPA, RMA 973-835-7900 973-579-3212 Thomas M. Ferry, CPA, RMA Fax 973-835-6631 Fax 973-579-7128 INDEPENDENT AUDITOR'S REPORT The Honorable Board of Chosen Freeholders County of Passaic Paterson, New Jersey We have audited the accompanying balance sheets-regulatory basis of the various funds and account group of the County of Passaic, as of and for the years ended December 31, 2008 and 2007, and the related statements of operations and changes in fund balance-regulatory basis for the years then ended, and the related statement ofrevenues-regulatory basis and statement of expenditures-regulatory basis of the various funds for the year ended December 31, 2008. These financial statements are the responsibility of the County of Passaic's management. Our responsibility is to express an opinion on these financial statements based on our audits. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of the Community Development Grant Fund as of December 31, 2008 and 2007 which represents 22.8 and 23.8 percent, respectively, of the assets of the Trust Fund for the years then ended. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Community Development Grant Fund, is based solely uponthe reports of the other auditors. Except as discussed below, we conducted our audits in accordance with auditing standards generally accepted in the United States of America, the audit requirements prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, 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 statements are free of material misstatement. An audit includes consideration ofinternal control over financial reporting as a basis for designing 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 over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for our opinion. (Fwc9 - 1 - The Honorable Board of Chosen Freeholders Page 2. As described in Note 1, these financial statements were prepared in conformity with the accounting practices prescribed or permitted by the Division of Local Government Services, Department of Community Affairs, State ofNew Jersey, that demonstrates compliance with the modified accrual basis, with certain exceptions, and the budget laws of New Jersey, which practices differ from accounting principles generally accepted in the United States of America. The affect on the financial statements of the variances between the prescribed basis of accounting and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. In our opinion, because of the County of Passaic's policy to prepare its financial statements on the basis of accounting discussed in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of the County of Passaic, New Jersey as of December 31, 2008 and 2007 or the results of its operations for the years then ended. However, in our opinion, the financial statements referred to above present fairly, in all material respects, the financial position - regulatory basis of the various funds and account group of the County of Passaic, State of New Jersey as of December 31, 2008 and 2007 and the results ofits operations and changes in fund balance - regulatory basis of such funds for the years then ended and the statement of revenues - regulatory basis and the statement of expenditures - regulatory basis for the year ended December 31, 2008, on the bask of accounting described in Note 1. In accordance with Government Auditing Standards, we have also issued a report dated May 26, 2009 on our consideration of the County of Passaic, New Jersey internal control over financial reporting and our tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements and other matters. 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Our audit was conducted forthe purpose of forming an opinion on the financial statements of the County of Passaic, State of New Jersey taken as a whole. The accompanying schedules of expenditures of federal and state awards are 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 New Jersey OMB Circular 04-04 and are not a required part of the financial statements.