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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. 765 NORTH MAIN + SPANISH FORK. UTAH 64660 + (801) 798-3545 + FAX 4801) 798-3678 + WWW.LARSCO.COM SIX ❑FF10E LOCATIONS IN UTAH. CALIFORNIA AND NEVADA 2 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) 3 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) 4 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) 5 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) 6 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)