The county has developed the following Materiality Policy to address State Examiner Directive 2015-6 as follows:
(A) Designation of point person(s)/position. All erroneous or irregular variances, losses, shortages or thefts of funds or property either owned or held in trust by the County must be reported to Internal Control Advisory Committee. In the absence of the Internal Control Advisory Committee, or in the event the Internal Control Advisory Committee is a party to the reported variance, the Internal Control Advisory Committee will serve as an alternate to the Internal Control Advisory Committee.
(B) Cash and non-cash materiality threshold. The county must report to the Indiana State Board of Accounts (SBOA) any erroneous or irregular variances, losses, shortages, or cash in excess of $50,000 and non-cash items in excess of $100,000 estimated market value. At its discretion, the county may report items below the dollar threshold based on a qualitative evaluation of the matter.
(C) Action steps when a matter is reported. County personnel are responsible for completing an incident report with the Internal Control Advisory Committee and/or Internal Control Advisory Committee. The Internal Control Advisory Committee and/or Internal Control Advisory Committee will perform an evaluation of the matter using the following guidelines:
(1) Log-in all incident reports for permanent record using an electronic folder and Word or Excel summary document that sequentially numbers, dates and accounts for each report submitted.
(2) Read the incident report to determine the nature of the loss, shortage, or theft and evaluate whether it is erroneous or irregular. The Internal Control Advisory Committee and/or Internal Control Advisory Committee will document a conclusion on whether the matter is subject to the materiality policy. If not subject to the policy, the Internal Control Advisory Committee and/or Internal Control Advisory Committee will close the incident and retain documentation in accordance with the county's record retention policy.
(D) For losses, shortages, or thefts that are considered erroneous or irregular, the Internal Control Advisory Committee and/or Internal Control Advisory Committee will perform the following steps to better understand the matter and measure the dollars at risk:
(1) Determine what further questions or documentation may be required. The Internal Control Advisory Committee and/or Internal Control Advisory Committee will determine whether the matter should be escalated within the county organization based on their understanding of the nature of the matter.
(2) Conduct an investigation of the matter through interviews and documentation gathering based on the investigation plan.
(3) Measure the actual or potential dollar amounts at risk (cash and noncash) to determine whether the incident is considered material.
(4) Measure the qualitative impact of the incident.
(5) Document conclusion on whether the incident is material or qualitatively significant.
(E) For erroneous or irregular losses, shortages, or thefts considered material or qualitatively significant the Internal Control Advisory Committee and/or Internal Control Advisory Committee must:
(1) Determine if there is actual knowledge or reasonable cause to believe a misappropriation of public funds occurred. For matters considered to be misappropriation of public funds, the Internal Control Advisory Committee and/or Internal Control Advisory Committee will document the county's understanding of the incident, report the matter to appropriate county officials and determine the communication protocol for expedient reporting to the SBOA and the local prosecutor's office.
(2) For matters not considered to be a misappropriation of public funds, the Internal Control Advisory Committee and/or Internal Control Advisory Committee will document the County's understanding of the matter including why the County believes the matter was not considered a misappropriation of public funds.
(3) Report the matter to the SBOA immediately upon confirming the variance, loss, shortage, or theft.
(F) For all matters (material or immaterial) reported under the materiality process, the Internal Control Advisory Committee and/or Internal Control Advisory Committee will perform the following steps:
(1) Identify the core reason for the incident and document the ineffective internal control design and/or internal control implementation as applicable to each incident.
(2) Analyze and measure the risk to determine significance and perform a cost-benefit analysis on the implementation of potential mitigating controls.
(3) Create a corrective action plan and/or document resolution of the matter.
(4) Design and implement, or update, internal controls to prevent ant mitigate future risk, as determined necessary.
(5) Maintain a centralized repository for documentation and resolution of all incidents reported, including:
(a) Materiality policy document;
(b) Incident log;
(c) Incident reports and documentation;
(d) County documentation supporting its investigation and evaluation;
(e) Support qualifying the lost, shortage, or theft as erroneous or irregular;
(f) Support determining the materialism of each incident;
(g) Standardized incident report form;
(G) The Internal Control Advisory Committee and/or Internal Control Advisory Committee will utilize either the notification link on the SBOA website, telephone, or in-person reporting to report material erroneous or irregular variances, losses, shortages, or thefts.
(Ord. 1403A, passed 12-13-2016)