2012 Fayette County TCC Audit Report - Swrtb.org

FAYETTE COUNTY TAX COLLECTION COMMITTEE

SOUTHWEST REGIONAL

TAX BUREAU, TAX OFFICER

FAYETTE COUNTY, PENNSYLVANIA

FINANCIAL REPORT DECEMBER 31, 2012


TABLE OF CONTENTS

PAGE

INDEPENDENT AUDITOR'S REPORT 1‐1A FINANCIAL STATEMENT

Statement of Cash Receipts, Cash Disbursements, and Cash Balances

2‐3

Notes to Financial Statements 4‐8

SUPPLEMENTARY INFORMATION Schedule of Reconciliation of Monthly Reports to Audited Receipts and Disbursements Required Under Section 509(b) of Pennsylvania Act 32 of 2008

9

Schedule of Bonding Analysis 10

Schedule of Collection Fees Charged 11

DCED COMPLIANCE SECTION

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

12‐13

Independent Auditor’s Report on Compliance with Pennsylvania Act 32 of 2008

14‐15

Schedule of Findings and Non‐Compliance 16‐23

210 West Pike Street 724.745.3543 tel

Canonsburg, Pennsylvania 15317 724.745.3390 fax

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INDEPENDENT AUDITOR’S REPORT Committee Members Fayette County Tax Collection Committee Fayette County, Pennsylvania Report on the Financial Statement We have audited the accompanying statement of cash receipts, cash disbursements, and cash balances as of and for the year ended December 31, 2012, and the related notes to the financial statement, which comprises Fayette County Tax Collection Committee’s (“TCC”) Tax Officer, Southwest Regional Tax Bureau, basic financial statement, as listed in the table of contents. Management’s Responsibility for the Financial Statement Fayette County TCC’s Tax Officer, Southwest Regional Tax Bureau’s management is responsible for the preparation and fair presentation of the financial statement in accordance with the TCC’s accounting policies consistently applied and in conformity with the cash basis of accounting and Pennsylvania Act 32 of 2008. This includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the financial statement that is free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on this financial statement 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 above referenced financial statement is free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement 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 entity’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 financial statement. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the statement of cash receipts, cash disbursements, and cash balances referred to above presents fairly, in all material respects, the cash receipts and cash disbursements of Fayette County Tax Collection Committee's (“TCC”) Tax Officer, Southwest Regional Tax Bureau for the year ended December 31, 2012, and its cash balance as of December 31, 2012, on the cash basis of accounting described in Note 1. Basis of Accounting We draw your attention to Note 1 of the financial statement, which describes the basis of accounting. The financial statement is prepared on the cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to that matter. Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statement that comprises the Fayette County Tax Collection Committee's Tax Officer, Southwest Regional Tax Bureau's basic financial statement. The accompanying Schedules of Supplementary Information, as required by Pennsylvania Act 32 of 2008, are presented for the purpose of additional analysis and are not a required part of the above referenced financial statement of Fayette County TCC's Tax Officer, Southwest Regional Tax Bureau. Such information is the responsibility of Fayette County TCC's Tax Officer, Southwest Regional Tax Bureau management and was derived from and relates directly to the underlying accounting and other records used to prepare the above referenced financial statement. The information has been subjected to the auditing procedures applied in the audit of the above referenced financial statement and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the above referenced financial statement or to the financial statement itself, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, such information is fairly stated, in all material respects, in relation to the financial statement taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated August 30, 2013, on our consideration of Fayette County TCC's Tax Officer, Southwest Regional Tax Bureau's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and 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 in considering Fayette County TCC's Tax Officer, Southwest Regional Tax Bureau's internal control over financial reporting and compliance.

CYPHER & CYPHER CERTIFIED PUBLIC ACCOUNTANTS Canonsburg, Pennsylvania August 30, 2013

1A

COLLECTIONS AND RECEIPTS

Resident EIT Received from Employers/Taxpayers within TCD 7,414,439$

Resident EIT Received from Other TCDs 3,926,782

Non‐Resident EIT Received for PSD within the TCD 310,310

Non‐Resident EIT Received for Other TCDs 2,128,463

Investment Income ‐

Cost Recovered by the Tax Officer 1,482

Other Collections:

Delinquent Earned Income Taxes Collected 2,864

Unidentified Collections ‐

TOTAL COLLECTIONS AND RECEIPTS 13,784,340

DISTRIBUTIONS AND DISBURSEMENTS

EIT Distributions to TCD Members

Albert Gallatin Area School District 880,070

Brownsville Area School District 439,991

Connellsville Area School District 1,267,388

Frazier School District 334,327

Laurel Highlands School District 1,054,250

Uniontown Area School District 888 318


TAX OFFICER ‐ SOUTHWEST REGIONAL TAX BUREAU

STATEMENT OF CASH RECEIPTS, CASH DISBURSEMENTS, AND CASH BALANCES

YEAR ENDED DECEMBER 31, 2012

Uniontown Area School District 888,318

Brownsville Borough 70,608

Brownsville Township 24,024

Bullskin Township 306,174

Connellsville City 248,327

Connellsville Township 93,556

Dawson Borough 11,171

Dunbar Borough 42,956

Dunbar Township 284,403

Fairchance Borough 70,301

Franklin Township 121,626

Georges Township 356,715

German Township 199,860


Henry Clay Township 79,288

Jefferson Township 89,380

Lower Tyrone Township 45,314

Luzerne Township 151,364

Markleysburg Borough 7,221

Masontown Borough 120,322

Menallen Township 179,314

Menallen Township 271

SEE NOTES TO THE FINANCIAL STATEMENT. 2



STATEMENT OF CASH RECEIPTS, CASH DISBURSEMENTS, AND CASH BALANCES


Newell Borough 17,896

Nicholson Township 69,555

North Union Township 487,355

Ohiopyle Borough 4,481

Perry Township 108,434

Perryopolis Borough 89,033

Point Marion Borough 38,939

Redstone Township 199,725

Saltlick Township 116,015

Smithfield Borough 38,241

South Connellsville Borough 65,154

South Union Township 608,747

Springfield Township 102,930

Springhill Township 105,445

Stewart Township 32,061

Uniontown City 344,720

Vanderbilt Borough 13,815

West Brownsville Borough 13,878

West Brownsville Borough 231

Wharton Township 196,718

Total EIT Distributions to TCD Members 10,024,470

EIT Distributions to Other TCDs (Note 3) 2,128,250

Taxpayer Refunds 1,493

Tax Officer Commissions 262,144

TCC Operational Fees ‐

Other Disbursements:

Unpaid EIT Invoices and/or Disbursement Adjustments ‐

Costs Retained by Tax Officer (Under Act 192) ‐

Unidentified Collections ‐ to be Distributed ‐

TOTAL DISTRIBUTIONS AND DISBURSEMENTS 12,416,357

COLLECTIONS AND RECEIPTS OVER/(UNDER)

DISTRIBUTIONS AND DISBURSEMENTS 1,367,983

Cash Balance ‐ January 1, 2012 ‐

Cash Balance ‐ December 31, 2012 1,367,983$

SEE NOTES TO THE FINANCIAL STATEMENT. 3

4

FAYETTE COUNTY TAX COLLECTION COMMITTEE TAX OFFICER – SOUTHWEST REGIONAL TAX BUREAU

NOTES TO FINANCIAL STATEMENT DECEMBER 31, 2012

Note 1 – Nature of Activities and Summary of Significant Accounting Policies Nature of Activities: Fayette County TCC (the “Committee”) is the Tax Collection Committee representing all taxing jurisdictions within Fayette County, Pennsylvania, as defined by Pennsylvania Act 32 of 2008. The Committee is comprised of representatives from each taxing jurisdiction. All action of the Committee is approved by the representatives using a weighted voting system based on each taxing jurisdiction’s percentage of earned income tax revenue and population. The Committee is responsible for overseeing the collection and distribution of earned income and net profit taxes within the Tax Collection District (the “TCD”). Members of the Tax Collection District are comprised of all school districts and municipalities within the geographic boundaries of the TCD. Non‐members are entities not included within the geographic boundaries of the TCD. Fayette County TCC has contracted with Southwest Regional Tax Bureau to collect and distribute the earned income and net profit taxes within the Fayette County Tax Collection District. Pennsylvania Act 32 of 2008 requires an audit of the receipts and disbursements of these taxes by an independent certified public accountant. This report is intended to meet that requirement. Summary of Significant Accounting Policies: Fayette County TCC’s Tax Officer, Southwest Regional Tax Bureau, maintains financial records related to the Earned Income Tax transactions on the cash basis of accounting which recognizes collections and other receipts when received and disbursements when paid. The accompanying financial statement is prepared on the cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. Therefore the statement is not intended to present the financial position or results of operations of Fayette County TCC’s Tax Officer, Southwest Regional Tax Bureau, in conformity with accounting principles generally accepted in the United States of America. Subsequent Events: In preparing this financial statement, the Fayette County TCC’s Tax Officer, Southwest Regional Tax Bureau, has evaluated events and transactions for potential recognition and disclosure through August 30, 2013, the date the financial were available to be issued.

Note 2 – Cash Balance and Concentration of Credit Risk The Tax Officer maintains an interest bearing escrow account that is insured to the maximum by the U.S. Federal Deposit Insurance Corporation (“FDIC”). Amounts over the FDIC insured limit are collateralized dollar for dollar by the bank as required by the Commonwealth of Pennsylvania Act 72 of 1971 to protect public funds.

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Deposits of governmental entities in excess of Federal Depository Insurance limits are required to be secured by pledged collateral either on a pooled or separate basis. These may be bonds of the United States, any State or Commonwealth of the United States, or bonds of any political subdivision of Pennsylvania, or the general state authority or other authorities created by the General Assembly of the Commonwealth of Pennsylvania. The Federal Reserve Bank does not consider earned income tax officers such as Southwest Regional Tax Bureau to be governmental entities. It considers them to be collection agencies. The accounts are held in trust for the TCC political subdivisions under State law, and therefore constitute public funds. These uninsured deposits of $1,367,983 are collateralized under Act 72 of 1971, with securities held by the pledging financial institution, or its trust department or agent, in the name of the TCC's designated Tax Officer. The cash balance consists of collections held, in escrow, pending receipt of monthly, quarterly or annual reports indentifying amounts due to the appropriate member of Fayette County TCC or other Tax Collection Districts. The cash balance at December 31, 2012, for members of the Fayette County TCC, totaled $1,367,983. The following are the entities for which money was held at December 31, 2012, and the amount held for each of those entities.

Members of Fayette County TCD Amount

Albert Gallatin Area School District $ 131,656

Brownsville Area School District 69,199

Connellsville Area School District 126,604

Frazier School District 33,109

Laurel Highlands School District 164,696

Uniontown Area School District 136,896

Brownsville Borough 12,065

Brownsville Township 3,167

Bullskin Township 25,210

Connellsville City 24,843

Connellsville Township 9,452

Dawson Borough 1,291

Dunbar Borough 4,322

Dunbar Township 35,100

Fairchance Borough 10,695

Franklin Township 14,619

Georges Township 55,116


Henry Clay Township 7,929

Jefferson Township 9,250

Lower Tyrone Township 4,813

Luzerne Township 27,833

Markleysburg Borough 431

Masontown Borough 18,675

Menallen Township 33,469

Newell Borough 2,441

Nicholson Township 11,170

North Union Township 83,405

Ohiopyle Borough 453

Perry Township 11,447

Perryopolis Borough 6,411

Point Marion Borough 4,334

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Redstone Township 30,744

Saltlick Township 10,089

Smithfield Borough 6,218

South Connellsville Borough 7,056

South Union Township 91,098

Springfield Township 9,755

Springhill Township 13,898

Stewart Township 5,487

Uniontown City 56,439

Vanderbilt Borough 1,188

West Brownsville Borough 1,375

Wharton Township 23,378

$ 1,367,983

Note 3 – Disbursements to Non‐Members of Fayette County TCD The following details the Out‐of‐County distributions presented in the Statement of Cash Receipts, Cash Disbursements, and Cash Balances.

Non‐members of Fayette County TCD

Amount (Revised)

Adams $ 2,044 Armstrong 9,544 Beaver 6,327 Bedford 8,021 Berks 2,692 Blair 7,185 Bradford 1,495 Bucks 2,991 Butler 20,442 Cambria 15,844 Cameron 1,209 Carbon 572 Centre 829 Chester 2,561 Clarion 5,622 Clearfield 58,158 Clinton 1,501 Columbia 3,041 Crawford 9,020 Cumberland 12,811 Dauphin 15,450 Delaware 4,147 Elk 2,829 Erie 11,588 Forest 262 Franklin 3,455 Fulton 84 Greene 181,728 Huntingdon 1,904

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Indiana 15,567 Jefferson 18,481 Juniata 2,197 Lackawanna 2,267 Lancaster 2,791 Lawrence 2,473 Lebanon 1,226 Lehigh 23 Luzerne 3,211 Lycoming 4,903 McKean 1,650 Mercer 6,735 Mifflin 3,331 Monroe 479 Montgomery 3,013 Northampton 167 Northumberland 1,571 Perry 3,947 Philadelphia 9 Pike 371 Potter 2,928 Schuylkill 817 Snyder 2,079 Somerset 88,781 Sullivan 3 Susquehanna 1,188 Tioga 4,046 Union 91 Venango 544 Warren 652 Washington 390,334 Wayne 46 Westmoreland 804,525 Wyoming 906 York 10,423 Allegheny Central 95,511 Allegheny North 42,791 Allegheny Southeast 90,656 Allegheny Southwest 123,588 Total Non‐members of Fayette County TCD 2,127,677 Adjustment to Disbursements (451) Southwest Regional Tax Collection Bureau 1,024 $ 2,128,250

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Note 4 – Source of Earned Income Tax Collections The earned income tax imposed is currently .5% ‐ 1.00% per year, depending on the municipality, of: Salaries, wages, commissions and other compensation earned by residents of the Fayette County

TCC. Net profits from self‐employment earned by residents of the Fayette County TCC.

Collections are shared among the applicable taxing jurisdictions within the TCC. The following taxing jurisdictions belong to the Fayette County TCC and are serviced by Southwest Regional Tax Bureau:

School Districts Cities

Albert Gallatin Brownsville Menallen Brownsville Ohiopyle Connellsville

Brownsville Area Bullskin Nicholson Dawson Perryopolis Uniontown

Connellsville Connellsville North Union Dunbar Point Marion

Frazier Dunbar Perry Fairchance Smithfield

Laurel Highlands Franklin Redstone Markleysburg South Connellsville

Uniontown Georges Saltlick Masontown Vanderbilt

German South Union Newell West Brownsville

Henry Clay Springfield

Jefferson Springhill

Lower Tyrone Stewart

Luzerne Wharton

Townships Boroughs

Municipalities

Note 5 – Tax Collection Contract Fayette County TCC has contracted with Southwest Regional Tax Bureau for the collection and distribution of earned income and net profit taxes. The contract term begins January 1, 2012 and continues through December 31, 2014 and is renewable for various additional periods at terms contained within the agreement. The contract calls for a collection fee of 2.25% of tax collections to be retained by the Fayette County Tax Collector upon collection with the net proceeds being distributed.

SUPPLEMENTARY INFORMATION

Amounts Per

Tax Collector Amounts Per Variance

Revised Audited Receipts (See Explanation

Monthly Reports and Disbursements Below)

Beginning Cash Balance ‐$ ‐$ ‐$

Plus Collections and Receipts

Resident EIT Received from Employers/Taxpayers within TCD 7,414,439 7,414,439 ‐

Resident EIT Received from Other TCDs 3,926,782 3,927,233 (451) (a)

Non‐Resident EIT Received for PSD within the TCD 310,310 310,310 ‐

Non‐Resident EIT Received for Other TCD's 2,128,463 2,127,677 786 (c)

Investment Income ‐ ‐ ‐

Cost Recovered by the Tax Officer 1,482 1,482 ‐

Other Collections:

Delinquent Earned Income Taxes Collected 2,864 2,864 ‐

Unidentified Collections ‐ ‐ ‐

TOTAL COLLECTIONS AND RECEIPTS 13,784,340 13,784,005 335

Less Distributions and Disbursements

EIT Distributions to TCD Members 10,024,470 10,024,470 ‐

EIT Distributions to Other TCDs 2,128,250 2,127,677 573 (a)(b)

Taxpayer Refunds 1,493 707 786 (c)

Tax Officer Commissions for EIT 262,144 262,144 ‐

TCC Operational Fees ‐ ‐ ‐

Other Disbursements:

Disbursement Adjustments ‐ ‐

Costs Retained by Tax Officer (Under Act 192) ‐ 1,024 (1,024) (b)

Unidentified Collections ‐ to be Distributed ‐ ‐ ‐

TOTAL DISTRIBUTIONS AND DISBURSEMENTS 12,416,357 12,416,022 335

Ending Cash Balance 1,367,983$ 1,367,983$ ‐$

Explanation of Variances:

(a) A variance of $451 was reported as a result of an adjustment to a disbursement made to non‐member TCD. A payment was

received from a non‐member Tax Officer that was $451 less than the tax records received with the disbursement. All taxpayers

accounts were appropriately credited for their tax payments. The difference of $451 in the payment received and the tax records

was adjusted and reduced in a subsequent disbursement made from Fayette County TCC to the non‐member Tax Officer.

(b) EIT distributions to other TCDs includes a payment of $1,024 made to Southwest Regional Tax Bureau. The payment is a

result of interest and penalties earned by the Tax Officer on delinquent collections in accordance with the tax collection contract.

The disbursement to Southwest Regional should not be included in the disbursements to other TCDs.

(c) The variance of $786 relates to a resident taxpayer who works out of state. The taxpayer's employer submitted a payment

for the taxpayer in error. The employer did not withhold the tax from the taxpayer and a refund was requested.



SCHEDULE OF RECONCILIATION OF MONTHLY REPORTS TO AUDITED RECEIPTS AND

DISBURSEMENTS REQUIRED UNDER SECTION 509(b) OF PENNSYLVANIA ACT 32 OF 2008


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Amount

Earned Income Tax Collections ‐ Current Collections within TCD 11,651,531$

Less: Taxpayer Refunds ‐ Earned Income Taxes¹ (707)

Earned Income Tax Collections ‐ Net 11,650,824$

Bonding Amount as Determined by TCC 1,000,000$

Actual Bond Amount 1,000,000$

Average Monthly Amount of Tax Collections in Possession of Tax Officer ² 970,902$

¹ The amount represents taxpayer refunds for resident taxpayers only.

²Per the contract between the Fayette County Tax Collection Committee and the Tax Officer,

Southwest Regional Tax Bureau, is required to distribute collections on a monthly basis. Therefore,

the Tax Officer maintained an average collection balance below their bonding requirement set forth

in the contract.



SCHEDULE OF BONDING ANAYLSIS


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Amount

Earned Income Tax Collections ‐ Current Collections within TCD 11,651,531$

Less: Taxpayer Refunds ‐ Earned Income Taxes¹ (707)

Earned Income Tax Collections ‐ Net 11,650,824$

Collection Rate per TCC/Tax Officer Contract 2.25%

Projected Collection Fees 262,144$

Collection Fees Charged² 262,144$

¹ The amount represents taxpayer refunds for resident taxpayers only.

² Tax Officer, Southwest Regional Tax Bureau, calculates commissions on the total monthly

disbursement made to each PSD.



SCHEDULE OF COLLECTION FEES CHARGED


11

DCED COMPLIANCE SECTION

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INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENT PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Committee Members Fayette County Tax Collection Committee Fayette County, Pennsylvania We have audited, in accordance with the 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, the accompanying statement of cash receipts, cash disbursements, and cash balances of Fayette County Tax Collection Committee's ("TCC") Tax Officer, Southwest Regional Tax Bureau, as of and for the year ended December 31, 2012, and the related notes to the financial statement, which comprises Fayette County Tax Collection Committee's ("TCC") Tax Officer, Southwest Regional Tax Bureau, basic financial statement, and have issued our report thereon dated August 30, 2013. Internal Control over Financial Reporting In planning and performing our audit of the financial statement, we considered Fayette County Tax Collection Committee's ("TCC") Tax Officer, Southwest Regional Tax Bureau'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 opinion on the financial statement, but not for the purpose of expressing an opinion on the effectiveness of Fayette County Tax Collection Committee's ("TCC") Tax Officer, Southwest Regional Tax Bureau's internal control. Accordingly, we do not express an opinion on the effectiveness of Fayette County Tax Collection Committee's ("TCC") Tax Officer, Southwest Regional Tax Bureau'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 non‐compliance, we identified certain deficiencies 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 above referenced financial statement will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying schedule of findings and non‐compliance to be a material weakness (Financial Statement Finding #1).

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Compliance and Other Matters As part of obtaining reasonable assurance about whether Fayette County TCC's Tax Officer, Southwest Regional Tax Bureau's financial statement is free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and 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 Governmental Auditing Standards and which are described in the accompanying schedule of findings and non‐compliance as items Act 32 Compliance Findings #1‐#5. Fayette County Tax Collection Committee's ("TCC") Tax Officer, Southwest Regional Tax Bureau's Response to Findings Fayette County Tax Collection Committee's ("TCC") Tax Officer, Southwest Regional Tax Bureau's response to the findings identified in our audit is described in the accompanying schedule of findings and non‐compliance. Fayette County Tax Collection Committee's ("TCC") Tax Officer, Southwest Regional Tax Bureau's response was not subjected to the auditing procedures applied in the audit of the financial statement 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 Fayette County TCC's Tax Officer, Southwest Regional Tax Bureau'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 Fayette County TCC's Tax Officer, Southwest Regional Tax Bureau's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. CYPHER & CYPHER CERTIFIED PUBLIC ACCOUNTANTS Canonsburg, Pennsylvania August 30, 2013

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INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH PENNSYLVANIA ACT 32 OF 2008

Committee Members Fayette County Tax Collection Committee Fayette County, Pennsylvania Report on Compliance We have audited Fayette County TCC’s Tax Officer, Southwest Regional Tax Bureau’s compliance with the provisions described within Pennsylvania Act 32 of 2008 for tax collections and other receipts, investments, reporting, bonding, recordkeeping, distribution of earned income taxes and other disbursements, and administration (hereafter “tax collections and disbursements”) that could have a direct and material effect on Fayette County TCC’s Tax Officer, Southwest Regional Tax Bureau for the year ended December 31, 2012. Management’s Responsibility Fayette County TCC’s Tax Officer, Southwest Regional Tax Bureau’s management is responsible for compliance with the requirements of laws, regulations, contracts, and agreements applicable under Pennsylvania Act 32 of 2008. Auditor’s Responsibility Our responsibility is to express an opinion on compliance with Pennsylvania Act 32 of 2008 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 Pennsylvania Act 32 of 2008. Those standards and Pennsylvania Act 32 of 2008 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 tax collections and disbursements occurred. An audit includes examining, on a test basis, evidence about Fayette County TCC’s Tax Officer, Southwest Regional Tax Bureau’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe our audit provides a reasonable basis for our opinion on compliance with Pennsylvania Act 32 of 2008. However, our audit does not provide a legal determination on Fayette County TCC’s Tax Officer, Southwest Regional Tax Bureau’s compliance.

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Basis of Adverse Opinion on Compliance with Pennsylvania Act 32 of 2008 As described in the accompanying schedule of findings and non‐compliance, Fayette County TCC’s Tax Officer, Southwest Regional Tax Bureau did not comply with the requirements regarding Act 32 Section 509(b) as described in Act 32 Compliance Finding Numbers #1 ‐ #5 for reporting, recordkeeping, and administration. Compliance with such requirements is necessary, in our opinion, for Fayette County TCC’s Tax Officer, Southwest Regional Tax Bureau to comply with the requirements applicable to Act 32. Adverse Opinion In our opinion, because of the significance of the matters discussed in the “Basis for Adverse Opinion on Compliance with Pennsylvania Act of 2008” paragraph, Fayette County TCC’s Tax Officer, Southwest Regional Tax Bureau did not comply, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on tax collections and disbursements for the year ended December 31, 2012.

CYPHER & CYPHER CERTIFIED PUBLIC ACCOUNTANTS Canonsburg, Pennsylvania August 30, 2013

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FAYETTE COUNTY TAX COLLECTION COMMITTEE TAX OFFICER – SOUTHWEST REGIONAL TAX BUREAU SCHEDULE OF FINDINGS AND NON‐COMPLIANCE

FOR THE YEAR ENDED DECEMBER 31, 2012

Findings – Financial Statement Audit

Financial Statement Finding #1

Criteria Finding Criteria – In performing our audit, we consider internal control over financial reporting as a basis for designing our audit procedures for the purpose of expressing our opinion on the financial statements.

Condition Condition Found – Procedures note deficiencies in internal controls relating to the reconciliation process of the monthly and aggregate financial statement provided to the Tax Collection Committee and each political subdivision (PSDs). The reconciliation process verifies total collections and receipts agree to the total distributions and disbursements for the Tax Collection Committee and each PSD. The reconciliation process verifies resident and non‐resident taxpayer and employer collections agree to the books and records of the Tax Collector and are appropriately classified. The reconciliation process verifies the cumulative collections received and disbursements made to the PSDs agree to the total amounts reported to the Tax Collection Committee. In addition, the process verifies total collection for other Tax Collection Districts (TCDs) agrees to the amounts disbursed to other TCDs. The reconciliation process was not completed which assures all financial transactions are appropriately recorded to the financial statement of the Tax Collection Committee.

Cause/Effect Cause of the Finding – The Tax Collector, Southwest Regional Tax Bureau, utilizes a third‐party software company, RBA Professional Data Systems, Inc., to process and report earned income tax collections. RBA’s software structure did not prepare accurate monthly or aggregate financial statements.

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Effect of the Finding – The monthly and aggregate financial statement presented to the Tax Collection Committee and each PSD did not accurately disclose the collections and receipts and distributions and disbursements of the Tax Collection Committee.

Recommendations Implement monthly closing procedures to reconcile the monthly reports and the annual financial statement to verify the reports accurately classify collections and receipts and distributions and disbursements of the Tax Collection Committee.

Tax Officer’s Response and Corrective Action Plan

Southwest Regional Tax Bureau worked with their software company, RBA, to correct reporting reconciliation issues. The financial statement was revised, and revised monthly reports are being issued to the Tax Collection Committee and each PSD.

Findings of Non‐Compliance with Pennsylvania Act 32 of 2008

Act 32 Compliance Finding #1

Criteria Finding Criteria – The Tax Officer shall, within 20 days after the end of each month, provide a written report, on forms prescribed by the Department of Community and Economic Development of the Commonwealth “DCED”, to the secretary of the Tax Collection Committee and to the secretary of each political subdivision in the tax collection district for which taxes were collected during the previous month. The report shall include a breakdown of all income taxes, income generated from investments, penalties, costs and other money received, collected, expended and distributed for each political subdivision served by the tax officer and of all money distributed to political subdivision served by the Tax Officer and of all money distributed to Tax Officers for other Tax Collection Districts (Act 32 Section 509(b)).

Condition Condition Found – Audit procedures noted the monthly reports provided to the Tax Collection Committee and each of the PSDs in the Tax Collection District were not accurately reported.

Cause/Effect Cause of the Finding – The Tax Collector, Southwest Regional Tax Bureau, utilizes a third‐party software company, RBA Professional Data Systems, Inc., to process and report earned income tax collections. Southwest Regional Tax Bureau is responsible for coding the software to identify which line of the monthly report and the aggregate financial statement the collections are to be appropriately

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classified in accordance with DCED prescribed forms CLGS‐32‐7, Report for Tax Collection Districts, and CLGS‐32‐7A, Schedule A – Report for Municipal & School Districts within the Tax Collection District. The software coding structure was not properly setup. Effect of the Finding – The incorrect software coding structure resulted in resident and non‐resident collections, delinquent collections and other collections not being accurately reported on the correct lines as prescribed by the DCED. However, total collections were properly reported. Questioned Costs – There are no questioned costs associated with the finding.

Recommendations Southwest Regional Tax Bureau should review the current coding structure and correct the codes to verify amounts are properly reported on the DCED reports. Revised reports should be sent to the Tax Collection Committee and each of the PSDs.


Southwest Regional Tax Bureau is in agreement with the finding. The Tax Officer has reviewed and corrected the current coding structure. Revised monthly reports will be remitted to the Tax Collection Committee and each of the political subdivisions.


Criteria Finding Criteria – The Tax Officer shall, within 20 days after the end of each month, provide a written report, on forms prescribed by the Department of Community and Economic Development of the Commonwealth “DCED”, to the secretary of the Tax Collection Committee and to the secretary of each political subdivision in the tax collection district for which taxes were collected during the previous month (Act 32 Section 509(b)).

Condition Condition Found – Audit procedures noted the monthly reports provided to the Tax Collection Committee did not include the required year‐to‐date column.

Cause/Effect Cause of the Finding – The Tax Collector, Southwest Regional Tax Bureau, utilizes a third‐party software company, RBA Professional Data Systems, Inc., to process and report earned income tax collections. The monthly reports prepared for the Tax Collection

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Committee from the software do not include a year‐to‐date total column as prescribed by the DCED form CLGS‐32‐7, Report for Tax Collection Districts. Effect of the Finding – The monthly reports provided to the Tax Collection Committee did not include a year‐to‐date total column and was not appropriately reported in accordance with DCED prescribed form. Questioned Costs – There are no questioned costs associated with the finding.

Recommendations Southwest Regional Tax Bureau should review the monthly reports provided to the Tax Collection Committee to verify the reports provide all information as prescribed by the DCED. A year‐to‐date column needs to be added on the monthly reports provided to the Tax Collection Committee.


Southwest Regional Tax Bureau is in agreement with the finding and will work with RBA to modify the monthly reporting format to include a year to date column. Subsequent to the report date, Southwest Regional Tax Bureau is sending the Tax Collection Committee a separate year‐to‐date report monthly.



Condition Condition Found – Audit procedures noted collections received from employers with multiple locations are reported based on the employer or tax collector from which the receipts/collections were

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received and not based on the employees’ reported work PSD code as prescribed by the DCED.

Cause/Effect Cause of the Finding – The Tax Collector, Southwest Regional Tax Bureau, utilizes a third‐party software company, RBA Professional Data Systems, Inc., to process and report earned income tax collections. The software does not utilize the work PSD code provided from the employer to correctly identify where taxpayer works to report collections as required by the DCED. All collections received from other tax collection districted are reported as non‐resident employers even if the taxpayers work location is within the Fayette County Tax Collection District. All collections received directly from taxpayers and employers are reported as resident employers even if the taxpayers work location is outside of Fayette County Tax Collection District. Effect of the Finding – Reporting collections based on who the receipts were received from provides inaccurate reporting for resident and non‐resident employers/taxpayers within the Tax Collection District. Questioned Costs – The questioned costs associated with the finding are not quantifiable.

Recommendations Southwest Regional Tax Bureau should review the current software structure and verify collections are reported by the employees work PSD code and not by whom the receipts were received from to verify amounts are properly reported on the prescribed DCED reports.


Southwest Regional Tax Bureau will work with the software company, RBA to create a second Act 32 report to comply with the finding.


Criteria Finding Criteria – The Tax Officer shall, within 20 days after the end of each month, provide a written report, on forms prescribed by the Department of Community and Economic Development of the Commonwealth “DCED”, to the secretary of the Tax Collection Committee and to the secretary of each political subdivision in the tax collection district for which taxes were collected during the previous

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month. The report shall include a breakdown of all income taxes, income generated from investments, penalties, costs and other money received, collected, expended and distributed for each political subdivision served by the tax officer and of all money distributed to political subdivision served by the Tax Officer and of all money distributed to tax officers for other Tax Collection Districts (Act 32 Section 509(b)).

Condition Condition Found – Audit procedures noted disbursements to other Tax Collection Districts are not properly reported on the monthly reports provided to the Tax Collection Committee. Amounts reported on Form CLGS‐32‐7B, Schedule B – Report for Distributions to other Tax Collection Districts, should include the amount of earned income tax distributed to each tax collection district by name. Total distributions from Schedule B must reconcile to the earned income tax distributions and collections for other tax collection districts as reported on the tax collection committee report.

Cause/Effect Cause of the Finding – The Tax Collector, Southwest Regional Tax Bureau, utilizes a third‐party software company, RBA Professional Data Systems, Inc., to process and report earned income tax collections. The current structure of the software does not have the ability to report disbursements based on the PSD codes. The software provides the name and amount of disbursements made using the tax collector to which the disbursement was paid rather than by individual TCD. Effect of the Finding – Reporting disbursements based on the tax collector’s name to which the disbursements were paid to provides inaccurate reporting. Certain tax collectors collect for multiple tax collection districts (TCDs), and the report does not detail to which TCD the funds were disbursed as required by Act 32. Questioned Costs – The questioned costs associated with the finding are not quantifiable.

Recommendations Southwest Regional Tax Bureau should review the current software structure and verify disbursements are reported by the tax collection district the disbursements were made to. Utilizing the employers work PSD code would properly identify which tax collection district the funds are disbursed to and allow proper reporting on the DCED reports.

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Southwest Regional Tax Bureau will work with the software company, RBA, to correct the Schedule B and report all disbursements by Tax Collection Districts (TCDs).



Condition Condition Found – Audit procedures noted the total distributions to other tax collection districts as reported on CLGS‐32‐7B, Schedule B – Report for Distributions to Other Tax Collection Districts, do not reconcile to the earned income tax distributions and collections for other tax collection districts as reported on the tax collection committee report as required by Act 32.

Cause/Effect Cause of the Finding – The Tax Collector, Southwest Regional Tax Bureau, utilizes a third‐party software company, RBA Professional Data Systems, Inc., to process and report earned income tax collections. The software reports amounts that are paid to Southwest Regional Tax Collection Bureau for fees earned on penalties and interest collected as disbursements on Schedule B – Report for Distributions to Other Tax Collection Districts. These amounts should not be included in distributions to other tax collection districts reported on the Schedule B. Effect of the Finding – Total disbursements from Schedule B do not reconcile to the earned income tax distributions and collections for other tax collection districts as reported on the tax collection committee report.

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Questioned Costs – The questioned costs associated with the finding are $1,023.74.

Recommendations Southwest Regional Tax Bureau should review the current software structure and verify disbursements made to the Southwest Regional Tax Bureau are properly reported on the monthly reports as an “other disbursements”. The disbursements for penalties and interest are not distributions for other tax collection districts (TCDs).


Southwest Regional Tax Bureau will work with the software company, RBA, to correct where the monies are remitted to Southwest Regional Tax Bureau on the Act 32 report. The monies will be removed from Schedule B.

2012 Fayette County TCC Audit Report - Swrtb.org

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Transcript of 2012 Fayette County TCC Audit Report - Swrtb.org