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Home My Public Portal About2003-2004 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, 2004 CITY OF MOAB, UTAH TABLE OF CONTENTS JUNE 30, 2004 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 o 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 August 19, 2004 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, 2004, and have issued our report thereon dated August 19, 2004. 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. However, we noted certain immaterial instances of noncompliance that we have reported to the management of the City in the management letter. 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 1 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 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 & Peterson Certified Public Accountants 2 STATE COMPLIANCE REPORT INDEPENDENT AUDITORS' REPORT ON LEGAL COMPLIANCE WITH APPLICABLE UTAH STATE LAWS AND REGULATIONS August 19, 2004 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, 2004, and have issued our report thereon dated August 19, 2004. 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, 2004. 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 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. We conducted our audit in accordance with generally accepted auditing standards, Government 3 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, 2004. Larson & Peterson Certified Public Accountants 4 MANAGEMENT LETTER CITY OF MOAB, UTAH CURRENT YEAR FINDINGS FOR THE YEAR ENDED JUNE 30, 2004 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. CITY RESPONSE: The City will ensure that all departments understand and follow the proper accounting policies and procedures. 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. CITY RESPONSE: The City has separated the impact fees from the Water and Sewer fund for record keeping purposes. Interest will be allocated as required for future fiscal years. 5 CITY OF MOAB, UTAH CURRENT YEAR FINDINGS (CONCLUDED) FOR THE YEAR ENDED JUNE 30, 2004 FINDING — BUDGETARY COMPLIANCE State law requires departmental 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. CITY RESPONSE: The City will monitor expenditures more closely and amend budgets as necessary. 6 CITY OF MOAB, UTAH STATUS OF PRIOR YEAR FINDINGS FOR THE YEAR ENDED JUNE 30, 2004 INTERNAL AND ACCOUNTING CONTROL FINDINGS FINDING — CITY OWNED CELL PHONES We noted during our audit that the policy of the City for employees who carry City owned cell phones to report the purpose of calls when call time becomes excessive is not always being followed. This creates an environment in which personal use of City owned cell phones could be paid for with taxpayer funds. We recommend that the City enforce the policy of reporting on excessive minutes to ensure that taxpayer funds are used only for purposes congruent with the duties of a municipality. STATUS: No problems noted in current year audit. FINDING — TRAVEL EXPENSE POLICY The existing travel expense policy makes it difficult for the accounts payable department to gather all necessary receipts and supporting documents from employees when they are reimbursed for travel expenses or when they use the city credit card. We recommend that the City modify its policy to ensure that documentation can be available for council approval in a timely manner. The City could require that receipts be obtained prior to the reimbursement be made and that charges made on a city credit card that cannot be documented with a receipt be charged to the employee. STATUS: No significant problems noted in current year. FINDING — SEPARATION OF DUTIES Because the same people who handle cash receipts also perform various bookkeeping functions and utility billings, there is no system of "independent checking" as would exist in a city with more accounting personnel. For example, it is usually best to assign the responsibility for receipting utility payments to someone other than the person in charge of utility billing. STATUS: No change. 7 CITY OF MOAB, UTAH STATUS OF PRIOR YEAR FINDINGS (CONCLUDED) FOR THE YEAR ENDED JUNE 30, 2004 STATE LEGAL COMPLIANCE FINDINGS FINDING — IMPACT FEE ACCOUNTING State laws require that impact fee money be allocated interest, and be reported separately. The City is tracking impact fees within the Water and Sewer Fund. 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: No change. FINDING — GENERAL FUND BALANCE LIMITATION State law requires that the fund balance in the general fund should not exceed 18% of budgeted revenue. At the end of the year the fund balance in the general fund exceeded the 18% maximum by approximately $318,000. We suggest steps be taken to reduce the fund balance in the general fund below the allowed maximum. STATUS: No problems noted in current year audit. BOND COMPLIANCE FINDINGS FINDING — WATER & SEWER BONDS The water bonds require reporting of water operations separate from sewer operations. The proposed sewer bonding is likely to require the same reporting for the sewer fund. STATUS: No change. Water and sewer operations are segregated within the same fund. 8