HomeMy Public PortalAbout2022 Audit - Management Letter
CITY OF PARKVILLE, MISSOURI
REQUIRED COMMUNICATIONS AND
MANAGEMENT LETTER
For the Year Ended December 31, 2022
City of Parkville, Missouri
Required Communications and Management Letter
For the Year Ended December 31, 2022
Table of Contents
Page
Number
Required Communications and Management Letter 1-5
1
To the Honorable Mayor and
Board of Aldermen
City of Parkville, Missouri
We have audited the financial statements of the governmental activities, business-type activities, each major
fund, and the aggregate remaining fund information of the City of Parkville, Missouri (the City) as of and for
the year ended December 31, 2022. Professional standards require that we provide you with information
about our responsibilities under generally accepted auditing standards and Government Auditing Standards,
as well as certain information related to the planned scope and timing of our audit. We have communicated
such information in our letter to you dated January 6, 2023. Professional standards also require that we
communicate to you the following information related to our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by the City are described in Note 1 to the financial statements. As described in
Note 1 to the financial statements, the City changed accounting policies related to leases by adopting
Statement of Governmental Accounting Standards (GASB) Statement No. 87, Leases, during 2022. No
other new accounting policies were adopted and the application of existing policies was not changed during
2022. We noted no transactions entered by the City during the year for which there is a lack of authoritative
guidance or consensus. All significant transactions have been recognized in the financial statements in the
proper period.
Accounting estimates are an integral part of the financial statements prepared by management and are
based on management’s knowledge and experience about past and current events and assumptions about
future events. Certain accounting estimates are particularly sensitive because of their significance to the
financial statements and because of the possibility that future events affecting them may differ significantly
from those expected. Significant accounting estimates used by the City’s management include determining
the allowance for doubtful accounts, the estimated historical cost of infrastructure and the related estimated
useful lives used in recording depreciation and accumulated depreciation for capital assets, and the
estimated obligation relating to pension benefits. We evaluated the key factors and assumptions used in
developing the above estimates in determining that they are reasonable in relation to the financial
statements taken as a whole.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no difficulties in dealing with management in performing and completing our audit.
However, there were delays in receiving certain required audit information and schedules.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the
audit, other than those that are clearly trivial, and communicate them to the appropriate level of management.
Management has corrected all such misstatements. We assisted with the adjustments necessary in
implementing GASB Statement No. 87, Leases. The following material misstatements were detected as a
result of our audit procedures and were corrected by management.
2
Adjustments to record accrued liabilities of $268,037.
Adjustment to record $411,520 unearned revenue for the remaining amount of unspent ARPA funds.
Adjustment to record $402,743 of insurance proceeds receivable and related deferred inflow of
$402,743.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing
matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the
auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management
representation letter dated December 27, 2023.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting
matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of
an accounting principle to the City’s financial statements or a determination of the type of auditor’s opinion
that may be expressed on those statements, our professional standards require the consulting accountant
to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no
such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing
standards, with management each year prior to retention as the City’s auditors. However, these discussions
occurred in the normal course of our professional relationship and our responses were not a condition to our
retention.
Other Matters
We applied certain limited procedures to the City’s management’s discussion and analysis and other
required supplementary information (RSI) as listed in the table of contents which are required to supplement
the basic financial statements. Our procedures consisted of inquiries of management regarding the methods
of preparing the information and comparing the information for consistency with management’s responses
to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the
basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance
on the RSI.
We were engaged to report on the combining and individual fund statements and schedules which
accompany the financial statements but are not RSI. With respect to the supplementary information
accompanying the financial statements, we made certain inquiries of management and evaluated the form,
content, and methods of preparing the information to determine that the information complies with accounting
principles generally accepted in the United States of America, the method of preparing it has not changed
from the prior period, and the information is appropriate and complete in relation to our audit of the financial
statements. We compared and reconciled the supplementary information to the underlying accounting
records used to prepare the financial statements or to the financial statements themselves.
3
In planning and performing our audit of the financial statements of the governmental activities, the business-
type activities, each major fund, and the aggregate remaining fund information of the City of Parkville,
Missouri as of and for the year ended December 31, 2022, in accordance with auditing standards generally
accepted in the United States of America, we considered the City’s internal control over financial reporting
(internal control) as a basis for designing our auditing procedures that are appropriate in the circumstances
for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing
an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on
the effectiveness of the City’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 discussed below, we identified certain deficiencies in internal control that we consider
to be material weaknesses.
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 entity’s financial
statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiency in
the City’s internal control described under Financial Reporting to be a material weakness.
As part of our annual audit, we try to identify opportunities for improving the management of financial
resources and for improving the internal controls over financial reporting. We are submitting, for your
consideration, our observations and recommendations with regard to these matters.
Management’s responses to our comments are included with this report. We did not audit the City’s
responses and, accordingly, we express no opinion on them.
CURRENT YEAR COMMENTS
Financial Reporting – Material Weakness
Management is responsible for establishing, maintaining, and monitoring internal controls over financial
reporting, and for the fair presentation of the financial statements and related notes in conformity with U.S.
generally accepted accounting principles. Under our professional standards, we have to assess the City’s
controls over preparing the financial statements. These controls should allow management or employees to
prevent, detect, and correct financial statements on a timely basis.
Our audit procedures identified adjustments that was required to properly report a certain transaction of the
City in accordance with generally accepted accounting principles. This adjustment was not initially identified
by the City’s internal controls over financial reporting.
We recommend that management review year-end closing procedures to ensure that transactions are
properly recorded in accordance with generally accepted accounting principles. In addition, due to the
complexities of financial reporting, we recommend that management explore various alternatives for
improving the controls over financial reporting including the use of governmental accounting standards,
reference guides and continuing education and training courses.
Management’s Response
Staff agrees with the adjustments recommended by our auditors. The City experienced staff turnover in the
finance area at the end of 2022 that had significant impact on the timing of performing year-end adjustments.
Staff understands that the City is ultimately accountable for the accuracy of the financial statements and will
endeavor to increase the in-house knowledge of governmental accounting standards to improve this
reporting process.
4
The City hired a Deputy City Administrator/Finance Director at the end of August 2023 for the purpose of
restructuring the finance processes of the City. While this change took place after the 2022 fiscal year, we
are encouraged that the amount of adjustments staff performed increased over prior years. Staff has already
started the 2023 audit process and believe there will be substantial overall improvements in processes and
procedures to make for smoother, more efficient financial audits moving forward.
Key Personnel
The City is exposed to certain management risks including among others, the possible loss of continuity and
disruption in City operations with the loss of key personnel either through retirement or unanticipated
circumstance. We recommend that City management evaluate and identify the exposure to such risks and
develop plans to mitigate such risks. Such plans might include developing an emergency management plan;
performing succession planning for key members of management; documenting specific workflow
responsibilities and requirements, and increased cross-training of City personnel.
Management’s Response
The City is continuing to review continuity concerns due to any potential staff turnover. The risk to a smaller
community such as Parkville is high due to having limited resources. For this reason, the City Administrator
has embarked on a comprehensive review of all areas of both internal staffing and professional relationships.
Throughout the past year the City has restructured positions to have an additional support and redundancy
in payroll, accounts payable and utility billing. In addition, the City has also entered into new contracts for
outsourcing human resources and financial advisory support to ensure ongoing technical support.
Future Accounting Pronouncements
The Governmental Accounting Standards Board (GASB) has issued the following statements which may
impact the City’s financial reporting requirements.
GASB Statement No. 94 Public-Private and Public-Public Partnerships and Availability Payment
Arrangements, effective for the fiscal year beginning January 1, 2023.
GASB Statement No. 96 Subscription-Based Information Technology Arrangements, effective for the
fiscal year beginning January 1, 2023.
GASB Statement 99 Omnibus, generally effective for fiscal year beginning January 1, 2023.
GASB Statement No. 100, Accounting Changes and Error Corrections—an amendment of GASB
Statement No. 62, effective for the fiscal year beginning January 1, 2024.
GASB Statement No. 101, Compensated Absences, effective for the fiscal year beginning January 1,
2024.
We recommend management review these standards to determine the impact they may have on the City’s
financial reporting.
Management’s Response
City staff will review all recent and upcoming GASB statements and ensure that any required changes are
incorporated in future financial reporting.
5
PRIOR YEAR COMMENTS
In the prior year, we issued certain comments and recommendations in regard to the City’s accounting,
internal control and financial reporting issues. The following table summarizes the nature and significance
of these comments as described in the prior year’s reports, and our determination of the status of those
comments.
Prior Year Comment
Description Significance Current Year Status
Financial Reporting We identified adjustments that were required to properly report certain
transactions in accordance with generally accepted accounting
principles. We recommended that management review year-end closing
procedures to ensure that transactions are properly recorded and
approved in accordance with generally accepted accounting principles.
Comment is repeated as material
adjustments were required to properly
report certain transactions in
accordance with generally accepted
accounting principles were identified.
Grant Management The City has a number of capital projects funded by grant agreements.
Under these agreements, the City will incur and pay project related costs
upfront and then request reimbursement for eligible costs from the
Grantee. During our audit, we noted that there was a time lag between
when the costs were incurred and paid and when the City requested
reimbursement from the Grantee. Such a time lag could create cash flow
concerns for the City. We recommended that the City review its grant
reimbursement policies and procedures to more timely request
reimbursements in accordance with grant agreement.
We continue to recommend that the
City review its grant reimbursement
policies and procedures to more timely
request reimbursements in
accordance with grant agreement.
Cyber Security Organizations are encountering more cyberattacks than in previous
years partly due to the migration of working remote. One example of a
cyberattack is through phishing emails asking employees to click on a link
which deploys malware to encrypt the Organization’s system. We
recommend that the City continue reviewing current policies and
procedures related to cyber security. Procedures should include training
employees on how to identify phishing emails and what to do if one is
suspected, review cyber security protocols for key systems, test back-
up systems with key data, and developing an incident response plan if
an attack occurs.
We continue to recommend that the
City continue reviewing current
policies and procedures related to
cyber security.
Future Accounting
Pronouncements
We recommended that management review upcoming standards to
determine what impact they may have on the City's financial reporting.
The City implemented all applicable
standards that became effective
during fiscal year 2022.
This report is intended solely for the information and use of the Mayor, Board of Alderman, and management
of the City, and is not intended to be and should not be used by anyone other than these specified parties.
Hood and Associates CPAs PC
Kansas City, Missouri
December 27, 2023