The URL can be used to link to this page

Home My Public Portal About2008 Audit Management LetterBRUCE D. CULLEY, CPA, P.C. 3000 Brooktree Lane, Suite 210 Gladstone, MO 64119 816-453-1040 - Fax 816-453-0721 October 10, 2009 Honorable Mayor and Board of Aldermen City of Parkville Parkville, Missouri As part of my audit of the financial statements of the City of Parkville as of and for the year ended December 31, 2008, I wish to communicate the following to you. Audit Scope and Results Auditor's Responsibility Under Auditing Standards Generally Accepted in the United States ofAnterica An audit performed in accordance with auditing standards generally accepted in the United States of America is designed to obtain reasonable, rather than absolute, assurance about the financial statements. In performing auditing procedures, I establish scopes of audit tests in relation to the financial statements taken as a whole. My engagement does not include a detailed audit of every transaction. My engagement letter more specifically describes my responsibilities. These standards require communication of significant matters related to the financial statement audit that are relevant to the responsibilities of those charged with governance in overseeing the financial reporting process. Such matters are communicated in the remainder of this letter or have previously been communicated during other phases of the audit. The standards do not require the auditor to design procedures for the purpose of identifying other matters to be communicated with those charged with governance. An audit of the financial statements does not relieve management or those charged with governance of their responsibilities. My engagement letter more specifically describes your responsibilities. Qualitative Aspects of Significant Accounting Policies and Practices Significant Accounting Policies The City's significant accounting policies are described in Note 1 of the audited financial statements. 1 Alternative Accounting Treatments • No matters are reportable. Management Judgments and Accounting Estimates Accounting estimates are an integral part of financial statement preparation by management, based on its judgments. The following areas involve significant areas of such estimates for which I am prepared to discuss management's estimation process and my procedures for testing the reasonableness of those estimates: • Allowance for uncollectible accounts receivable • Depreciable lives for property and equipment • Allocation of expenses to departments Financial Statement Disclosures The following areas involve particularly sensitive financial statement disclosures for which I am prepared to discuss the issues involved and related judgments made in formulating those disclosures: • New disclosures on endowments • New disclosures about fair value of assets and liabilities Audit Adjustments During the course of any audit, an auditor may propose adjustments to financial statement amounts. Management evaluates my proposal and records those adjustments which, in its judgment, are required to prevent the financial statements from being materially misstated. Areas in which adjustments were proposed include: Proposed Audit Adjustments Recorded • To record depreciation expense • To accrue interest on bonds • To allocate property taxes between the years • To correctly capitalize fixed assets • To accrue accounts payable at year end • To accrue accounts receivable for the sewer fund Proposed Audit Adjustments Not Recorded • None 2 Auditor's Judgments About the Quality of the Entity's Accounting Principles During the course of the audit, we made the following observations regarding the Organization's application of accounting principles: • None Disagreements with Management • No matters are reportable. Significant Issues Discussed with Management • No matters are reportable. D culties Encountered in Performing the Audit My audit requires cooperative effort between management and the audit team. I found management cooperative and helpful throughout my audit engagement. Other Material Written Communications Listed below are other material written communications between management and us related to the audit: • Management representation letter Internal Control Over Financial Reporting In planning and performing my audit of the financial statements, of the City of Parkville as of and for the year ended December 31, 2008, in accordance with auditing standards generally accepted in the United States of America, I considered the City's internal control over financial reporting (internal control) as a basis for designing my auditing procedures for the purpose of expressing my opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, I do not express an opinion on the effectiveness of the City's internal control. As such, my consideration of internal controls would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. A control deficiency exists when the design or operation of a control does not allow management or employees, in the noinial course of performing their assigned functions, to prevent or detect misstatements of the City's financial statements on a timely basis. A control deficiency in design exists when a control necessary to meet a control objective is missing or an existing control is not properly designed so that, even if the control operates as designed, a control objective is not always met. A control deficiency in operation exists when a properly designed control does not operate as designed or when the person performing the control does not possess the necessary authority or qualifications to perform the control effectively. 3 A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Organization's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the City's financial statements that is more than inconsequential will not be prevented or detected by the City's internal controls. A material weakness is a significant deficiency, or a combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the City's financial statements will not be prevented or detected by the City's internal controls. 1 observed the following matters that 1 consider to be control deficiencies, significant deficiencies or material weaknesses. Audit Adjustments — Material Weakness During the course of performing the audit, 1 identified several adjustments and proposed journal entries to the financial statements that were not previously identified by management's internal controls. These entries included adjustments to payroll, fixed assets, and bank accounts. I recommend management review these areas and establish procedures that will identify and resolve future variances in a timely manner. Authorized Payroll Amounts — Control Deficiency During the conduct of a payroll test, we discovered that an employee was not being paid the approved amount according to personnel files. The authorized amount had not been correctly set up in the computer. The accounting department should perform a review of the payroll amounts when changes are made and documentation placed in the file. Other Control Deficiencies • No matters are reportable. Other Matters Although not considered material weaknesses, significant deficiencies or other control deficiencies in internal control over financial reporting, 1 observed the following matters and offer these comments and suggestions with respect to matters which came to my attention during the course of the audit of the financial statements. My audit procedures are designed primarily to enable me to form an opinion on the financial statements and, therefore, may not bring to light all weaknesses in policies and procedures that may exist. However, these matters are offered as constructive suggestions for the consideration of management as part of the ongoing process of modifying and improving accounting controls and the financial and administrative practices and procedures. 1 can discuss this matter further at your convenience. 4 Inventory of Fixed Assets The City has not taken an inventory of fixed assets for several years. Prior to 2008, the depreciation schedule was maintained by outside accounting firms. City employees did not review the depreciation schedule and did not have knowledge of what had been recorded. The City now has a spreadsheet of the fixed assets and the next step should be. to conduct a physical inventory to verify the assets on the depreciation schedule. We would also suggest the City implement the fixed asset module with the general ledger so fixed asset records can be integrated with the rest of the accounting system. Court Bank Accounts There are several bank accounts which are maintained by the Office of the Court to which the finance department receives copies of the statement. It would be helpful if certain reports from the court system were available to finance personnel so they could verify some of the detail. The bank accounts are currently not shown on the trial balance. 5