HomeMy Public PortalAboutFY 2013 City of Rancho Mirage Single Audit - Final (2)CITY OF RANCHO MIRAGE,
CALIFORNIA
SINGLE AUDIT REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2013
CITY OF RANCHO MIRAGE, CALIFORNIA
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
TABLE OF CONTENTS
PAGE
Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance
and Other Matters Based on an Audit of Financial Statements Performed in Accordance with
Governmental Auditing Standards 1
Independent Auditors' Report on Compliance for Each Major Federal Program; Report on
Internal Control Over Compliance; and Report on Schedule of Expenditures of Federal Awards
Required by OMB Circular A-133 3
Schedule of Expenditures of Federal Awards 5
Note to Schedule of Expenditures of Federal Awards 6
Schedule of Findings and Questioned Costs
L Summary of Auditors' Results 7
II. Financial Statement Findings 8
III. Federal Award Findings and Questioned Costs 12
Schedule of Prior Audit Findings 13
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1W
Vavrinek, Trine, Day & Co., LLP
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF
FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT A UDITING STANDARDS
To the Honorable Mayor and Members of the Citi- Council
City of Rancho Mirage, California
We have audited, in accordance with the 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, the financial statements of the governmental activities, each major
fund, and the aggregate remaining fund information of the City of Rancho Mirage, California (City), as of and for
the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the
City's basic financial statements, and have issued our report thereon dated June 3, 2014. Our report included an
emphasis of matter paragraph regarding the City's adoption of Governmental Accounting Standards Board
(GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of
Resources, and Net Position as of July 1, 2012.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City's internal control over
financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances
for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an
opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the
effectiveness of the City's internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was
not designed to identify all deficiencies in internal control that might be material weaknesses or significant
deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified.
However, as described in the accompanying schedule of findings and questioned costs, we identified certain
deficiencies in internal control that we consider to be material weaknesses and significant deficiencies
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal
control, such that there is a reasonable possibility that a material misstatement of the City's financial statements
will not be prevented, or detected and corrected on a timely basis. We consider the deficiency described in the
accompanying schedule of findings and questioned costs as item 2013-01 to be a material weakness.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than
a material weakness, yet important enough to merit attention by those charged with governance. We consider the
deficiencies described in the accompanying schedule of findings and questioned costs as items 2013-02 through
20 13 -04 to be significant deficiencies.
Mailing Address: P. 0. Box 20439 Riverside, CA 92516
6370 Magnolia Avenue, Suite 330 Riverside, CA 92506 Tel 951.367.3000 Fax 951.367.3010 www.vtdcpa.com
FRESNO • LAGUNA HILLS • PALO ALTO • PLEASANTON • RANCHO CUCAMONGA • RIVERSIDE • SACRAMENTO
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City's financial statements are free from material
misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and
grant agreements, 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 or other matters that are required to be reported under Government Auditing
Standards.
City's Response to Findings
The City's responses to the findings identified in our audit are described in the accompanying schedule of findings
and questioned costs. The City's responses were not subjected to the auditing procedures applied in the audit of
the financial statements and, accordingly, we express no opinion on them.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the
results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on
compliance. This report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering the City's internal control and compliance. Accordingly, this communication is not
suitable for any other purpose.
Riverside, California
June 3, 2014
uri/ Vavrinek, Trine, Day & Co., LLP
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY
OMB CIRCULAR A-133
To the Honorable Mayor and Members of the City Council
City of Rancho Mirage, California
Report on Compliance for Each Major Federal Program
We have audited the City of Rancho Mirage, California's (City) compliance with the types of compliance
requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material
effect on each of the City's major federal programs for the year ended June 30, 2013. The City's major federal
programs are identified in the summary of auditors' results section of the accompanying schedule of findings and
questioned costs.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants
applicable to its federal programs.
Auditors' Responsibility
Our responsibility is to express an opinion on compliance for each of the City's major federal programs based on
our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in
accordance with auditing standards generally accepted in the United States of America; the standards applicable
to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United
States and OMB Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations. Those
standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance
about whether noncompliance with the types of compliance requirements referred to above that could have a
direct and material effect on a major federal program occurred. An audit includes examining, on a test basis,
evidence about the City's compliance with those requirements and performing such other procedures as we
considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal
program. However, our audit does not provide a legal determination of the City's compliance.
Opinion on Each Major Federal Program
In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to
above that could have a direct and material effect on each of its major federal programs for the year ended
June 30, 2013.
Mailing Address: P. 0. Box 20439 Riverside, CA 92516
6370 Magnolia Avenue, Suite 330 Riverside, CA 92506 Tel 951.367.3000 Fax 951.367.3010 www.vtdcpa.com
FRESNO • LAGUNA HILLS • PALO ALTO • PLEASANTON • RANCHO CUCAMONGA • RIVERSIDE • SACRAMENTO
Report on Internal Control Over Compliance
Management of the City is responsible for establishing and maintaining effective internal control over compliance
with the types of compliance requirements referred to above. In planning and performing our audit of compliance,
we considered the City's internal control over compliance with the types of requirements that could have a direct
and material effect on each major federal program to determine the auditing procedures that are appropriate in the
circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test
and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose
of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express
an opinion on the effectiveness of the City's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance
does not allow management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a
timely basis. A material weakness in internal control over compliance is a deficiency, or combination of
deficiencies, in internal control over compliance, such that there is a reasonable possibility that material
noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and
corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a
combination of deficiencies, in internal control over compliance with a type of compliance requirement of a
federal program that is less severe than a material weakness in internal control over compliance, yet important
enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph
of this section and was not designed to identify all deficiencies in internal control over compliance that might be
material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over
compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not
been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of
internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133.
Accordingly, this report is not suitable for any other purpose.
Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133
We have audited the financial statements of the governmental activities, each major fund, and the aggregate
remaining fund information of the City, as of and for the year ended June 30, 2013, and the related notes to the
financial statements, which collectively comprise the City's basic financial statements. We issued our report
thereon dated June 3, 2014, which contained unmodified opinions on those financial statements. Our report
included an emphasis of matter paragraph regarding the City's adoption of Governmental Accounting Standards
Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of
Resources, and Net Position as of July 1, 2012. Our audit was conducted for the purpose of forming opinions on
the financial statements that collectively comprise the basic financial statements. The accompanying schedule of
expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular
A-133 and is not a required part of the basic financial statements. Such information is the responsibility of
management and was derived from and relates directly to the underlying accounting and other records used to
prepare the basic financial statements. The information has been subjected to the auditing procedures applied in
the audit of the financial statements and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the basic financial statements
or to the basic financial statements themselves, and other additional procedures in accordance with auditing
standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of
federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole.
7�
Riverside, California
June 16, 2014
4
CITY OF RANCHO MIRAGE
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2013
Name of Agency, Pass -Through Entity, Grant or Program
Federal
Catalog
Number
Pass-through
Entity or Grant
Identifying
Number
Federal
Expenditures
U.S. Dept. of Transportation
Passed -through State of California
Department of Transportation
Highway Planning and Construction:
Highway Bridge Program
20.205
08-5412R
$ 210,629
Safe Routes to School
20.205
003265
898,031
Total Expenditures of Federal Awards
$ 1,108,660
See accompanying notes to the Schedule of Expenditure of Federal Awards.
CITY OF RANCHO MIRAGE
NOTE TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2013
NOTE #1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General
The accompany schedule of expenditures of federal awards presents the activity of all federal awards
programs of the City of Rancho Mirage (City). The City's reporting entity is defined in Note 1 of the City's
basic financial statements. All federal awards received directly from federal agencies, as well as federal
awards passed through other governmental agencies to the City are included in the accompanying schedule.
B. Basis of Accounting
The accompanying schedule of expenditures of federal awards is presented using the modified -accrual basis
of accounting, which is described in Note 1 of the City's basic financial statements.
C. Relationship to the Basic Financial Statements
Federal awards revenues are generally reported within the City's basic financial statements under the financial
statement caption Intergovernmental Revenues.
D. Relationship to Federal Financial Reports
Amounts reported in the accompanying schedule of expenditures of federal awards agree with the amounts
reported in the related federal financial reports. However, certain federal financial reports are filed based on
cash expenditures. As such, certain timing differences may exist in the recognition of revenues and
expenditures between the schedule of expenditures of federal awards and the federal financial reports.
E. Amounts provided to subrecipients
The City provided $898,031 to the Palm Springs Unified School District for Safe Routes to School under
CFDA No. 20.205.
6
CITY OF RANCHO MIRAGE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013
I. SUMMARY OF AUDITORS' RESULTS
FINANCIAL STATEMENTS
Type of auditors' report issued:
Unmodified
Internal control over financial reporting:
Material weaknesses identified?
Yes
Significant deficiencies identified?
Yes
Noncompliance material to financial statements noted?
No
FEDERAL AWARDS
Internal control over maj or programs:
Material weaknesses identified?
No
Significant deficiencies identified?
None reported
Type of auditors' report issued on compliance for major programs:
Unmodified
Any audit findings disclosed that are required to be reported in accordance with
Circular A-133, Section .510(a)
No
Identification of major programs:
CFDA Number Name of Federal Program or Cluster
20.205 Highway Planning and Construction
Dollar threshold used to distinguish between Type A and Type B programs: $ 300,000
Auditee qualified as low-risk auditee? No
7
CITY OF RANCHO MIRAGE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013
II. FINANCIAL STATEMENT FINDINGS
FINDING 2013-01
CASH MANAGEMENT
Criteria:
The City should have controls in place to ensure all bank reconciliations are completed and reviewed on a timely
basis. Reconciling items should be investigated in a timely manner. Also, the City should implement procedures
to ensure the monthly investment reports are issued within 90 days of the end of the monthly reporting period as
required by the City's investment policy.
Condition:
As of August 2013, monthly cash reconciliations had not been performed for the 12-13 fiscal year. Also, monthly
investment reports for the 12-13 fiscal year had not been issued.
Context:
The condition noted above was identified during our test work of the City's cash and investment balances.
Effect:
As a result of the above, the timing of the audit was modified to allow the City to perform the reconciliations.
Timely reconciliations of cash accounts and the issuance of monthly investment reports are key internal controls
for the safeguarding of City assets. As a result of the condition, the internal control environment is weakened.
Cause:
The City did not maintain procedures to ensure that cash accounts were reconciled on a timely basis and that
monthly investment reports were issued timely.
Recommendation:
We recommend strengthening procedures to ensure that cash reconciliations and monthly investment reports are
completed timely.
View of Responsible Officials and Planned Corrective Action:
Management agrees with the finding. The City updated its Investment Policy in January of 2014. As part of the
updated Policy, Quarterly Investment Reports are now required instead of monthly reports. The Quarterly
Investment Reports will be provided to City Council no later than 30 days after the end of the reporting quarter.
The City is currently up to date on reporting of the Quarterly Investments Reports to City Council. Management
has also implemented a process to ensure bank reconciliations are performed timely.
CITY OF RANCHO MIRAGE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013
II. FINANCIAL STATEMENT FINDINGS
FINDING 2013-02
FRAUD POLICY
Criteria:
The City should establish an anti fraud policy to enforce controls and to aid in the prevention and detection of
fraud, theft, waste, or abuse against the City.
Condition:
A formal anti fraud policy had not been implemented by the City during the 12-13 fiscal year. However, it was
noted that during the 13-14 fiscal year the City's anti fraud policy was formalized.
Context:
The condition noted above was identified during our inquiries with management and staff.
Effect:
Formalized policies and procedures for the identification and reporting of fraud by City employees were not
implemented during the year.
Cause:
The Citv did not have a formal policy for anti fraud during the year.
Recommendation:
As noted in the condition above, a formal anti fraud policy was adopted subsequent to year end.
View of Responsible Officials and Planned Corrective Action:
Management agrees with the finding. Management implemented a formal fraud policy in September 2013.
W
CITY OF RANCHO MIRAGE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013
II. FINANCIAL STATEMENT FINDINGS
FINDING 2013-03
YEAR-END CLOSING PROCEDURES
Criteria:
The City should have policies and procedures in place to ensure the year-end closing is performed completely,
accurately, and in a timely manner to allow for the preparation of the financial statements and other management
reports.
Condition:
Various accounts were not reconciled in a timely manner to allow for the preparation of the financial statements
and other management reports. City staff performed the reconciliations and provided closing entries for the
following accounts subsequent to a delay in fieldwork:
• Revenue and expenditure activity in the City's affordable housing projects
• Reclassification of expenditures between the General Fund and the Measure A fund
• Fair value of the City's pooled investments
• Land held for resale
• Assessment Districts
Additionally, certain accounts reported in the Redevelopment Successor Agency Private -purpose Trust required
adjustment including amortization of deferred costs of issuance (understated by $150 thousand) and interest
payable (overstated by $62 thousand).
Context:
The condition noted above was identified during testing of various accounts and presentation related to the City's
financial statements.
Effect:
Based on the condition above, the timing of audit was delayed.
Cause:
The City's closing process did not ensure a complete and timely close.
Recommendation:
We recommend strengthening procedures to ensure that the year-end close is complete and timely. This can be
achieved through an enhanced comprehensive closing checklist.
View of Responsible Officials and Planned Corrective Action:
Management agrees with the finding. We have implemented procedures to insure a timely close.
10
CITY OF RANCHO MIRAGE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013
II. FINANCIAL STATEMENT FINDINGS
FINDING 2013-04
PAYROLL - PERSONNEL ACTION FORMS
Criteria:
Changes in employee pay rates are documented through the use of a Personnel Action Form (PAF). The current
practice is to have the PAF approved, however the approvals required on each PAF has not been formalized.
Condition:
The City does not have a policy on the PAF approval process.
Context:
The condition noted above was identified during our inquiries with management and staff and testing of payroll
transactions.
Effect:
Based on the condition above, the required approvals of the PAF are unclear.
Cause:
The City does not have a policy on the PAF approval process.
Recommendation:
We recommend the City formalize a policy on PAF approval.
View of Responsible Officials and Planned Corrective Action:
Management agrees with the finding. Management will formalize a policy over PAF approval.
11
CITY OF RANCHO MIRAGE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013
III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
None noted.
12
CITY OF RANCHO MIRAGE
SCHEDULE OF PRIOR AUDIT FINDINGS
YEAR ENDED JUNE 30, 2013
Summarized below is the current status of corrective action of prior audit findings:
Financial Statement Findings
Finding No.
Area
Status of Corrective Action
2012-01
Fraud/Ethics Policy
Not Implemented - See CY Finding 2013-02
2012-02
Cash Management
Not Implemented - See CY Finding 2013-01
2012-03
Payroll
Not Implemented - See CY Finding 2013-03
Federal Award Findings
13
Status of
Finding No.
Program
CFDA No.
Compliance Requirement
Corrective Action
2011-03
ARRA—State Energy Program
81.041
Reporting
Implemented
2011-04
Highway Planning and Construction
20.205
Allowable activities and allowable costs
Implemented
2011-05
ARRA—State Energy Program;
81.041 &
Procurement
Implemented
Highway Planning & Construction
20.205
13