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Home My WebLink About1999-01-12 - AGENDA REPORTS - ANNUAL FINANCIAL REPORT (2)CONSENT CALENDAR DATE: SUBJECT: DEPARTMENT: AGENDA REPORT City Manager Approv Item to be presented by: Steve Stark January 12, 1999 6-30-98 COMPREHENSIVE ANNUAL FINANCIAL REPORT AND MANAGEMENT LETTER Administrative Services RECOMMENDED ACTION Receive Comprehensive Annual Financial Report and Management Letter for FYE 6-30-98. BACKGROUND The City's independent audit firm, Moreland & Associates, has completed the City's annual audit for fiscal year ending June 30, 1998. Moreland & Associates 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, Moreland & Associates 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 FYE 6-30-98. An excerpt of this letter is shown as Attachment 1. As part of the audit engagement, Moreland & Associates prepared a Management Letter (Attachment 2) 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 weaknesses in internal controls. For FYE 6-30-98, there were no significant material weakness comments by the auditors. Moreland and Associates has incorporated the City's response into their recommendations. ALTERNATIVE ACTIONS No feasible alternative action has been identified by staff. FISCAL IMPACT None. ATTACHMENTS 1) Audited Opinion Letter dated September 11, 1998 2) Management Letter for FYE 6-30-98 Comprehensive Annual Financial Report Year Ended June 30, 1998 is available in the City Clerk's reading file. s:\fin\audit\caft98\agenda.dm Moreland &,W"ocadew CERTIFIED PUBLIC ACCOUNTANTS September 11, 1998 The Honorable City Council of the City of Santa Clarita, California Independent Auditors' Report 1201 DOVE STREET, SUITE 680 NEWPORT BEACH, CALIFORNIA 92660 (949) 221-0025 570 RANCHEROS DRIVE, SUITE 260 SAN MARCOS, CA 92069 (760) 7523390 We have audited the accompanying general purpose financial statements of the City of Santa Clarita, California as of and for the year ended June 30, 1998, as listed in the table of contents. These general purpose financial statements are the responsibility of the City of Santa Clarita management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards 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 perforin 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 general purpose 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, 1998, and the results of its operations and cash flows of its proprietary fund types for the year then ended in conformity with generally accepted accounting principles. As discussed in Note 10 to the financial statements, the City has implemented GASB Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. In accordance with Government Auditing Standards, we have also issued our report dated September 11, 1998 on our consideration of the City of Santa Clarity internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. Our audit was performed for the purpose of forming an opinion on the general purpose financial statements of the City of Clarita taken as a whole. The accompanying combining, individual fund and account group financial statements and schedules listed as supplementary information in the table of contents are presented for purposes of additional analysis and are not a required part of the general purpose financial statements. 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 was not audited by us and, accordingly, we do not express an opinion thereon. 1 .✓1.11 CERTIFIED PUBLIC ACCOUNTANTS September 11, 1998 Mr. Steve Stark Director of Administrative Services City of Santa Clarita 23920 Valencia Blvd., Suits 300 Santa Clarita, CA 91355-2196 Dear Mr. Stark: 1201 DOVE STREET, SUITE 680 NEWPORT BEACH, CALIFORNIA 92660 (949) 221-0025 570 RANCHEROS DRIVE, SUITE 260 SAN MARCOS, CA 92069 (760) 752-0390 We have audited the general purpose financial statements of the City of Santa Clarita, California as of and for the year ended June 30, 1998, and have issued our report thereon dated September 11, 1998. In planning and performing our audit of the general purpose financial statements of the City of Santa Clarita for the year ended June 30, 1998, we considered its internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on the internal control over financial reporting. We noted no matters involving the internal control over financial reporting and its operation that we considered to be material weaknesses under standards established by the American Institute of Certified Public Accountants which was reported to the City Council in a separate letter dated September 11, 1998. However we noted items of less significance which are discussed below. DEFERRED LOANS Auditors' Comments and Recommendations: During our testwork of HOME and CDBG Deferred Loans, we noted the City had not recorded the loans and related deferred revenue in the general ledger. Also, one HOME loan had been paid off, however, the City did not update the subsidiary ledger to reflect the pay off. This was a result of staff turnover in grant administration and undocumented procedures to identify the grant expenditures and program income as loan related transactions. We recommend the City document its policies and procedures to identify these as loans in order to properly record all deferred loans in the general ledger. We also recommend the City update the subsidiary ledger as payments are received. Management Response: Procedures have been established to ensure all loan activity is recorded in a timely manner. Mr. Steve Stark Director of Administrative Services City of Santa Clarita September 11, 1998 Page 2 OCJP Auditor's Comments and Recommendations: During testwork of the OCJP grant, we noted the City requested and received reimbursement for $13,815 in excess of actual program expenditures on the OCJP grant for the year ended October 31, 1997 for grant JC96027953. The excess funds requested were based on encumbrances for goods that were not ultimately received. To comply with OCJP grant requirement 6330.1 limiting reimbursements to goods and services actually received, we recommend City only request reimbursement for actual amounts expended on the program. Management Response: Reimbursement requests are now being reviewed by the Finance Division to ensure only actual expenditures are being requested to be reimbursed. The staff involved in the reimbursement process have also been properly trained. This report is intended for the use of management, although we recognize that it may become a public document when issued to the City. We would like to express our appreciation for the courtesy and assistance extended to us during our audit by all of your sta4f. We would be pleased to discuss with you at your convenience the matters contained in this letter or any other matters which you would like to discuss. Very truly yours, MORELAND &ASSOCIATES Michael C. Moreland, Partner MCM:shn