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Home My WebLink About1994-01-11 - AGENDA REPORTS - ANNUAL FIN RPT MGMT LETTER (2)AGENDA REPORT City Manager Approval Item to be presented by: Steve Stark SS NEW BUSINESS DATE: January 11, 1994 SUBJECT:. 6-30-93 Comprehensive Annual Financial Report and Management Letter DEPARTMENT: Finance BACKGROUND The City's independent audit firm, Diehl, Evans and Company, has completed the City's annual audit for fiscal year ending June 30, 1993. Diehl, Evans and Company conducted the audit in accordance with generally accepted auditing standards whereby an audit plan was prepared and followed to obtain reasonable assurance that the City's financial statements were free from material misstatements. The Audit included an examination, on a test basis, of evidence supporting the amounts and disclosures in the financial statements. The audit also included assessing the accounting principles used and significant estimates made by management as well as evaluating the overall general purpose financial statement presentation. Based on the audit performed, Diehl, Evans and Company issued an unqualified audit opinion letter which reflects the best level of opinion an organization can receive on its financial statements. This letter is identified as the "Independent Auditors' Report" in the City's Comprehensive Annual Financial Report for FY 6-30-93. An excerpt of this letter is shown at Attachment 1. As part of the audit engagement, Diehl, Evans and Company prepared a Management Letter to comment on the City's internal control structure and its operations. The purpose of this letter is to make recommendations for management to implement procedures to improve systems in place or note significant material weaknesses in internal controls which could jeopardize City's assets. For FY 6-30-93, there were no significant material weakness comments by the auditors. Diehl, Evans and Company has incorporated the City's response to their recommendations and comments. RECOMMENDATIONS 1. Receive oral presentation from Diehl, Evans and Company covering City's financial audit and internal control structure and its operation. 2. Receive Comprehensive Annual Financial Report and Management Letter for FYE 6-30-93. ATTACHMENTS • 6-30-93 Comprehensive Annual Financial Report - available in the City Clerk's reading file • Management Letter dated December 7, 1993 • Attachment 1 - audit opinion letter dated September 24, 1993 gNcovnciVcheckreg.agn DIEBL,EVANS &COMPANY CERT1ElED PUBLIC ACCOU7NTANFS A PAATNEASHIP P'=L G ANJWiANCY WMR TIONS 18401 VON KARMAN AVE., SUITE 200 IRVINE, CALIFORNIA 92715-1542 PHONE (714) 757-7700 FAX (714) 757.2707 Honorable Mayor, Members of City Council and City Manager of the City of Santa Clarity Santa Clarita, California December 7, 1993 RODNEY K, McDAWEL, CPA MICHAEL R. LCDIS. CEA ROBERT R. WINE. CPA CRAIG W. SPRAKER. CCA PHILIP H. HOLTKAMP. CPA THOMAS M. PERLOWSKI. CPS HARVEY I SCHROEDER, CPA In planning and performing our audit of the financial statements of the City of Santa Clarita for the year ended June 30, 1993, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control structure. Our study and evaluation was more limited than would be necessary to express an opinion on the system of internal accounting control taken as a whole and we do not express such an opinion. The management of the City of Santa Clarita is responsible for establishing and maintaining a system of internal accounting control. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of a system are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, ant that transactions are executed in accordance with management's authorization and recorded properly. During our audit, we noted certain matters involving the internal control structure and its operation that we wish to call to your attention, These matters are set forth below, together with our recommendations for improvement. PROPERTY MANAGEMENT Auditor comment and recommendation: We noted that rent increases to tenants are not billed in a timely manner. We recommend the City develop a system which provides for the rent increases to be invoiced when they become effective. This will improve accounting for rental revenues earned. OTHER OFFICES AT: 2965 ROOSEVELT STREET 613 W VALLEY PARKWAY, SUITE 330 CARLSBAD, CA 9200&2389 ESCONDIDO, CA 92D25 2352 (619)729-2343 (619) ' 41 3141 FAX (619) 7292214 FAX 5619) 741-9990 Honorable Mayor, Members of the City Council and December 7, 1993 City Manager of the City of Santa Clarita Page 2 Managements response: The General Services division is currently working on automating the property management billing functions. A completion date of February, 1994 is anticipated to implement a new software program which will provide invoices and reports in a more timely manner from tenant data. However, most of the City's rental increases are tied to the Consumer Price Index (CPI). This information is released on a mid -month basis. Since the City bills on the fust of each month there will always be a lag time before a rental increase is assessed which will result in a retroactive billing. FIXED ASSETS Auditor comment and recommendation: We noted that the City accounts for fixed assets only by compiling a yearly list of additions and deletions. To more accurately account for fixed assets, we recommend that a "cumulative total" fixed assets schedule be prepared and reconciled as to additions, deletions, and transfers between departments on a quarterly basis. Management response: The Finance Department is currently working on a strategic plan item to track fixed assets. A completion date of June, 1994 is anticipated to implement a new software program which will provide a cumulative listing with a total that agrees with the general ledger and other reports relating to additions and deletions of assets. These conditions were considered in determining the nature, timing and extent of the audit tests to be applied in our audit of the City of Santa Clarita's financial statements and this letter does not affect our report on these financial statements dated September 24, 1993, This letter is intended solely for the information and use of the City Council and City Management. We wish to thank the Finance Department staff for their cooperation and assistance to our staff during our audit. If we can be of further assistance in clarifying any of the above points, please do not hesitate to contact us. ®DiEHL,EvANs &COMPANY CERIlF1ED !'L'BDC .ACCOLNTANiS +GnXRJ HIP INaL ,�YUNTA'k'Y CbRRJMi10rv5 18401 VON KARMAN AVE., SUIT[ 2W IRVINE, CALIFORNIA 92715-1542 PHONE (714) 757.7700 FAX (714) 7572707 September 24, 1993 INDEPENDENT AUDITORS' REPORT City Council City of Santa Clarita Santa Clarita, California RODNEY K.. M,DiNIEL,CPa MICHAEL IUDIN CPA ROBERTR WINE.CPA CRAIG W SPR>KER, C+ PHILIP H HOLMMP. CPA n40MAS.M PERLO%'SKI CPA HARVEY SCHRCIEDER-CR> We have audited the, general purpose financial statements of the City of Santa Clarita, California as of and for the year ended June 30, 1993, as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards required that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Santa Clarita as of June 30, 1993 and the results of its operations and the cash flows of its proprietary fund types for the year then ended in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The financial statements of the individual funds and account groups listed in the table of contents under supplementary information are presented for purposes of additional analysis and are not a required pact of the general purpose financial statements of the City of Santa Clarita, The information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the general purpose financial statements taken as a whole. The statistical information listed in the table of contents is not a required part of the basic financial statements, and we did not audit or apply limited procedures to such information and do not express any assurance on such information. D&�1.� E«am�- arn.cC -1- Grum' U O -MER. OFFICES AT. '%S RCOSEVELT 4ERE0 n1I W. VALLEY PAKK.k'A1 y._ CARL5BAD. CA 91N ,JMN ESCONDIDO CA 920:i 16191729 -INN 11191741 )141 FAX 16191 ]79.3211 PiC IR191 NI 41 , ATTACHMENT 1