HomeMy Public PortalAbout2011-2012 Audit Management letter draftL,ARSON & ROSENBERGER LLP
CERTIFIED PUBLIC ACCOUNTANTS
September 24, 2012
To the Honorable Mayor and
Members of the City Council
City of Moab, Utah
We have audited the financial statements of the governmental activities, the business -type activities, each major
fund, and the aggregate remaining fund information of Moab City for the year ended June 30, 2012. Professional
standards require that we provide you with information about our responsibilities under generally accepted
auditing standards (and, if applicable, Government Auditing Standards and OMB Circular A-133), 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 July 3, 2012. Professional standards also require that we communicate to you the
following information related to our audit.
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by Moab City are described in Note 1 to the financial statements. No new accounting
policies were adopted and the application of existing policies was not changed during 2012. We noted no
transactions entered into by the governmental unit 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.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit,
other than those that are trivial, and communicate them to the appropriate level of management. Management
has corrected all such misstatements.
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as 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 September 24, 2012.
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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 governmental unit'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 governmental unit's auditors. However, these
discussions occurred in the normal course of our professional relationship and our responses were not a condition
to our retention.
This information is intended solely for the use of Moab City, management of Moab City, and other various Federal
and State funding and auditing agencies and is not intended to be and should not be used by anyone other than
these specified parties.
Very truly yours,
Larson & Rosenberger, LLP
Certified Public Accountants
(Continued)
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SCHEDULE OF FINDINGS - CURRENT YEAR
State Compliance Finding (s)
SC-2012.1 Unclaimed property report
Finding:
Unclaimed property is tangible or intangible property for which an owner cannot be located.
Intangible property includes such items as money, interest, credit balances, refunds, etc.. A
government entity holding intangible property for more than one year after the property became
payable or distributable must report and remit the property to the State Treasurer's Office by
November 1 of each year as of the preceding June 30. A `nil' report (no unclaimed property) is not
required to be filed. Due to an oversight by management, the City's report was not filed in a timely
manner.
Recommendation:
It is recommended that the City complete and finalize the unclaimed property report and submit
the report and property to the State Treasurer's Office by the due date each year, if required.
Client Response:
Management will prepare and file the report with the State Treasurer's Office. Management will
monitor more closely the unclaimed property in the future and will submit the required report and
property if required.
**Remaining part of page intentionally left blank**
(Continued)
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Internal Control Finding (s)
IC-2012.1 Separation of Duties (Significant Deficiency)
Finding:
Proper separation of duties is a key effective internal control because it can aid in reducing the
risk of mistakes and inappropriate actions, and can help fight fraud through discouraging collusion.
We noted during our audit that the City lacks proper segregation of duties which results in
weakness in internal controls.
Recommendation:
We recommend that, to the extent possible, the City segregate duties to serve as a check and
balance to maintain the best control system possible. Due to the limited number of staff at the
City we also recommend that the Council provide oversight on the financial operations of the City.
Client Response:
The city plans to remain vigilant in separating duties where possible, and provide mitigating
controls where adequate separation is not possible due to the limited staff size at the City.
IC-2012.2 Cash Handling Policies
Finding:
Quality internal controls over cash require proper documentation and verification by more than
one employee. It was noted during our inquiry at the Moab Arts and Recreation Center (MARC)
that forms documenting beginning and ending cash amounts are not currently being used. Cash
received is stored in drawers without locks.
Recommendation:
We recommend that personnel at the MARC adopt proper cash handling procedures similar to
those at other cash collecting venues controlled by the City. In particular the use of some type of
form to document beginning and ending daily cash balances and have at least two people count
and verify cash.
Client Response:
The client understands and agrees with the need for internal controls over cash handling and
reporting. They will adopt and follow appropriate cash management procedures at the MARC.
(Continued)
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SCHEDULE OF FINDINGS - PRIOR YEAR
State Compliance Finding (s)
SC-2011.1 Impact Fee Report
Finding:
Each municipality shall present an impact fee report which identifies impact fee funds by the year
in which they were received, the project from which the funds were collected, the capital projects
for which the funds were budgeted, and the projected schedule for expenditure in a format
developed by the State Auditor, certified by their financial officer and transmitted annually to the
State Auditor. Due to an oversight by management, the City's report was not filed in a timely
manner.
Recommendation:
It is recommended that the City complete and finalize the impact fee report in the correct format
laid out by the State Auditor and submit it to the State Auditor's office by the due date each year.
Status:
There were no issues noted in the current period.
(Continued)
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Internal Control Finding (s)
IC-2011.1 Cash Disbursements
Finding:
It was noted during the cash disbursement testing that 2 of the 60 checks sampled did not contain
all of the information or documentation tested for. One of the disbursements tested was mis-
coded in the general ledger. It was determined that had the check been properly coded it would
not have caused a budgetary compliance issue. Therefore the finding is limited to the miscoding
of the check. Another disbursement did not contain supporting documentation required to be
attached to the check stub when filed.
Recommendation:
We recommend that the City double check accounts when posting to the general ledger and that
all disbursements issued should have supporting documentation attached and filed with the
records.
Status:
No issues noted in current period.
IC-2011.2 Separation of Duties (Significant Deficiency)
Finding:
Proper separation of duties is a key effective internal control because it can aid in reducing the
risk of mistakes and inappropriate actions, and can help fight fraud through discouraging collusion.
We noted during our audit that the City lacks proper segregation of duties which results in
weakness in internal controls.
Recommendation:
We recommend that, to the extent possible, the City segregate duties to serve as a check and
balance to maintain the best control system possible. Due to the limited number of staff at the
City we also recommend that the Council provide oversight on the financial operations of the City.
Status:
See current period findings.
IC-2011.3Cash Handling Policies
Finding:
Quality internal controls over cash require proper documentation and verification by more than
one employee. It was noted during our inquiry at the Moab Arts and Recreation Center (MARC)
that forms documenting beginning and ending cash amounts are not currently being used. Cash
received is stored in drawers without locks.
Recommendation:
We recommend that personnel at the MARC adopt proper cash handling procedures similar to
those at other cash collecting venues controlled by the City. In particular the use of some type of
form to document beginning and ending daily cash balances and have at least two people count
and verify cash.
Client Response:
The client understands and agrees with the need for internal controls over cash handling and
reporting. They will adopt and follow appropriate cash management procedures at the MARC.
(Continued)