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Home My Public Portal About2004-2005 Audit Management LetterCITY OF MOAB, UTAH INDEPENDENT AUDITORS' REPORT IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS, INDEPENDENT AUDITORS' REPORT ON LEGAL COMPLIANCE AND MANAGEMENT LETTER JUNE 30, 2005 CITY OF MOAB, UTAH TABLE OF CONTENTS JUNE 30, 2005 GOVERNMENT AUDITING STANDARDS REPORT Independent Auditors' Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of General -Purpose Financial Statements Performed in Accordance With Government Auditing Standards STATE COMPLIANCE REPORT Independent Auditors' Report on Legal Compliance with Applicable Utah State Laws and Regulations CURRENT YEAR FINDINGS STATUS OF PRIOR YEAR FINDINGS Pages 1-2 3-4 5-6 7-8 GOVERNMENT AUDITING STANDARDS REPORT Al LARSON & COMPANY INDEPENDENT AUDITORS' REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF BASIC FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS September 23, 2005 Honorable Mayor and City Council Members City of Moab, Utah We have audited the accompanying basic financial statements of the City of Moab, Utah (herein referred to as the "City"), as of and for the year ended June 30, 2005, and have issued our report thereon dated September 23, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether the City's basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the basic financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operations that we consider to be material SANDY. OFFICE 9065 SOUTH 1300 EAST SANDY. UTAH 84094 18011 313-1900 FAX (801) 313-1912 SPANISH FORK OFFICE 765 NORTH MAIN SPANISH FORK, UTAH 64660 (801 ) 798-3545 FAX (801) 798.3678 1 MOAB OFFICE 121 EAST 100 SOUTH SUITE 104 MOAB. UTAH 84532 (4351 259-9100 FAX (801 ) 259.9100 MEMBER OF THE INTERNATIONAL ACCOUNTING GROUP (TIAG) 4 WW1N.LAR5CO.COM weaknesses. However, we noted other matters involving the internal control over financial reporting that we have reported to management in the management letter. This report is intended for the information of the Mayor and City Council, management, and various federal and state funding and auditing agencies and is and is not intended to be and should not be used by anyone other than these specified parties. Larson & Company Certified Public Accountants 2 STATE COMPLIANCE REPORT LARSON & COMPANY CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT ON LEGAL COMPLIANCE WITH APPLICABLE UTAH STATE LAWS AND REGULATIONS September 23, 2005 Honorable Mayor and City Council Members City of Moab, Utah We have audited the basic financial statements of the City of Moab, Utah, as of and for the year ended June 30, 2005, and have issued our report thereon dated September 23, 2005. As part of our audit, we have audited the City of Moab's compliance with the requirements governing types of services allowed or unallowed; eligibility; matching, level of effort, or earmarking; reporting; special tests and provisions applicable to each of its major State assistance programs as required by the State of Utah Legal Compliance Audit Guide for the year ended June 30, 2005. The City received the following major State assistance programs from the State of Utah: B and C Road Funds (Department of Transportation) Liquor Law Enforcement (State Tax Commission) Our audit also included test work on the City's compliance with those general compliance requirements identified in the State of Utah Legal Compliance Audit Guide, including: Public Debt Cash Management Purchasing Requirements Budgetary Compliance Other General Compliance Requirements Uniform Building Code Standards Impact Fees and Other Development Fees Asset Forfeiture The management of the City of Moab is responsible for the City's compliance with all compliance requirements identified above. Our responsibility is to express an opinion on compliance with those requirements based on our audit. SANDY. OFFICE 9065 SOUTH 1300 EAST SANDY. UTAH 84094 1801) 313-1900 FAX (901) 313-1912 SPANISH FORK OFFICE 765 NORTH MAIN SPANISH FORK. UTAH 84660 (801) 798-3545 FAX (801) 798.3678 MOAB OFFICE 121 EAST 100 SOUTH SUITE 104 MOAB. UTAH 84532 (4351 259-9100 FAX (901) 259.9100 MEMBER OF THE INTERNATIONAL ACCOUNTING GROUP (TIAG) + WWW.LAR5CO.COM We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion. The results of our audit procedures disclosed immaterial instances of noncompliance with the requirements referred to above, which are described in the management letter. We considered these instances of noncompliance in forming our opinion on compliance, which is expressed in the following paragraph. In our opinion, the City of Moab, Utah, complied, in all material respects, with the general compliance requirements identified above and the requirements governing types of services allowed or unallowed; eligibility; matching, level of effort, or earmarking; reporting; and special tests and provisions that are applicable to each of its major State assistance programs for the year ended June 30, 2005. --vc,,,, Larson & Company Certified Public Accountants 4 CITY OF MOAB, UTAH CURRENT YEAR FINDINGS FOR THE YEAR ENDED JUNE 30, 2005 INTERNAL AND ACCOUNTING CONTROL FINDINGS FINDING — ACCOUNTING FOR ESCROW ACCOUNT In the prior year Moab City wrote a check to be deposited into an escrow account along with the bond proceeds used to finance the new city building. The check was recorded as a capital expenditure in the fund financial statements and booked as construction in progress in the government wide financial statements, rather than as a restricted cash account. This resulted in a prior period adjustment in the amount of $542,555 reflected in Note 4.D. in the notes to the financial statements. RECOMMENDATION: We recommend that the City reflect all asset accounts on the balance sheet of the City, including escrow accounts held for the benefit of the City. CITY'S RESPONSE: City staff is aware of the accounting issue will take appropriate action in the future. FINDING — DISBURSEMENTS Of 60 disbursements tested 2 did not have proper supporting documentation. RECOMMENDATION: We recommend that all disbursements be supporting by proper documentation. Every effort should be made to collect receipts and invoices from employees who travel on City business. CITY'S RESPONSE: City staff will make additional effort to collect and compile the necessary documentation. 5 CITY OF MOAB, UTAH CURRENT YEAR FINDINGS (CONCLUDED) FOR THE YEAR ENDED JUNE 30, 2005 STATE LEGAL COMPLIANCE FINDINGS FINDING — ACCOUNTING FOR CAPITAL LEASE AND BUDGETARY COMPLIANCE Governmental accounting requires that capital leases be accounted for by recording the lease proceeds as revenue and a corresponding capital expenditure. When this adjustment was made for the equipment purchased for the Police department it resulted in expenditures in excess of budget by $7,776. RECOMMENDATION: We recommend that the City budget for all expenditures, including those associated with capital leases, and make any necessary budget amendments before making expenditures in excess of budget. CITY'S RESPONSE: City staff is aware of the accounting requirement and will take appropriate action in the future. FINDING — GENERAL FUND BALANCE OVER LEGAL LIMIT The fund balance in the general fund exceeds the amount allowed by state law. The fund balance in the general fund may not exceed 18% of the total estimated revenue of the general fund. The ending fund balance in the general fund is $1,074,190 which is $159,014 over the maximum allowed ($915,176). RECOMMENDATION: We recommend that the City monitor its general fund balance more closely so as to make any necessary adjustments to ensure that it stays within the legal limits. CITY'S RESPONSE: City staff is aware of the requirement and will take appropriate action in the future. 6 CITY OF MOAB, UTAH STATUS OF PRIOR YEAR FINDINGS FOR THE YEAR ENDED JUNE 30, 2005 INTERNAL AND ACCOUNTING CONTROL FINDINGS FINDING — DONATIONS TO THE CITY It was noted during our audit that a donation check was cashed by the department to which the donation was made and the cash reportedly used for department purposes. Documentation for the expenditures was unavailable for review in order to determine their propriety. Further, council is required to approve all City expenditures, and in the situation described above this approval could not have taken place. RECOMMENDATION: We recommend that proper accounting procedures be followed by all departments. That is that all City revenue, including donations, be given to the City Treasurer and processed like other cash receipts and recorded as revenue to the City. The funds can be used at that point for department purposes using the normal procedures for expenditures. Budget adjustments can then be made if they become necessary. STATUS OF PRIOR YEAR FINDINGS No problems noted in current audit. STATE LEGAL COMPLIANCE FINDINGS FINDING — IMPACT FEE ACCOUNTING State laws require that impact fee money be reported separately and be allocated interest. The City is using a spreadsheet to track impact fees but no interest is being allocated. RECOMMENDATION: We suggest that impact fees be recorded in separate funds for both the water and sewer fees to make it easier to account for those fees as required. STATUS OF PRIOR YEAR FINDINGS No problems noted in current audit. 7 CITY OF MOAB, UTAH STATUS OF PRIOR YEAR FINDINGS (CONCLUDED) FOR THE YEAR ENDED JUNE 30, 2005 FINDING — BUDGETARY COMPLIANCE State law requires depai tmental expenditures be kept within budgeted amounts. The following fund was found to be over budget as of June 30, 2004, by the following amounts: Fund/Department Amount General Funds: Police Department $ 32,957 Special Revenue Funds: Moab Arts & Recreation Center 1,007 RECOMMENDATION: We recommend that expenditures be kept under budget, and if necessary, adjustments be made to the budget after proper public hearings have been held. STATUS OF PRIOR YEAR FINDINGS See current year findings. 8