HomeMy Public PortalAbout15) 7F Single Audit ReportCity Council
February 17 , 2015
Page 2 of 2
ANALYSIS:
As a recip ient of Federal grant funds in excess of $500 ,000 , the City is required to be in
compliance with the financial reporting requirements of the Office of Management and
Budget Circular A -133, Audits of States, Local Governments and Non-Profit Organizations .
The Single Audit Act of 1984 (amended in 1996) prounced the reporting process for
compliance , and is commonly known as the "Single Audit ". A Single Audit is intended to
provide a cost-effective audit of non -Federal entities in that one audit is conducted for all
Federal grant funds in lieu of individual aud its of each . All Single Audits are due to the
Federal reporting agencies nine months after the close of the fiscal year, (i .e ., March 31 ,
2015).
The City Council is requested to accept the Audit Committee's recommendation to
receive and file the Draft Single Audit Report so that staff can transmit the Single Audit
Report to the Federal report ing agencies by March 31 , 2015 .
CONCLUSION:
Filing of the Single Audit Report by March 31 , 2015 , will satisfy the financial reporting
requirements of the Federal reporting agencies .
FISCAL IMPACT:
This action of receiving and filing the Single Aud it does not have a fiscal impact on the FY
2014-15 City Budget.
ATTACHMENT:
A. Single Audit for the Year Ended June 30 , 2014.
REPORTS OF INDEPENDENT AUDITORS
Report of Independent Auditors on Interna l Control Over Financial Reporting
and on Compl iance and Other Matters Based on an Audit of Financial
Statements Performed in Accordance wi th Government Auditing Sta ndards
Report of Independent Auditors on Compliance For Each Major Program, on
Internal Control Over Compliance , and on the Schedule of Expend itures of
Federa l Awards Requ ired by OMS Circular A-133
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
STATUS OF PRIOR YEAR AUDIT FINDINGS
City of Temple City
Table of Contents
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City of Temple City
Schedule of Expenditures of Federal Awards
Year ended June 30 , 2014
Federal Grantor/Pass Through Grantor/Program Title
U.S. Department of Housing and Urban Dev e lopme nt
Passed-through County of Los Angeles :
Ho using Rehabilitation Loan Program
Community Development Block GranUEntitlemenl Grant
Asbestos and Lead -Based Paint Testing and Ab ate ment Program
Direct Assistance
Co mmu nity Development Block GranUEntitlement Gra nt
Total U.S. Department of Housing and Urban Dev e lopment
U.S. peoartment of Transportation
Passed-th rough State of Cali fornia
Department o f Transportatio n
Hi ghwa y Planning and Con struction
Total U.S. Department of Transpo rtation
Tota l Federal Expendit ures
• Ma jor Progra m
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Catalog of
Federal
Domestic
Assi stance
Number
14 174
14 .218
14 900
14 218
20 .205
Program
Identificatio n
Number
D96756-13
D97755-13
600604·13
601595-13,601596-13
CML-5365 (007)
$
F e deral
Award
Expenditures
120.406
26.882
30,966
139 ,771
318 ,025
2,687,330
2,687,330
$ 3,005,355
NOTE 1
NOTE 2
C ity of Temple City
Notes to Sch e dule of Expend itures of Federa l Awards
Year ended June 30 , 20 14
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Scope of Presentation
The accompany ing schedule of expend itures of fede ral awards presents on ly the
expenditures incurred by the City of Temple City , California (City ) th at are
reimbursab le under progra ms of federal agencies pro viding fin ancial awards. For
purposes of th is schedule , financial awards includ e federal awards recei ved directly
from a federal agency and federal fu nd s receiv ed i nd irectly by the City from a
nonfederal agen cy or other organization . Only the portion of program expend itures
reimb ursable w ith federa l funds is reported in the accompan yi ng schedule . Program
expenditures in excess of the ma ximum re im bursement authorized or the port ion of
the program expenditures that were funded with other state, loca l or other nonfederal
funds , if any , are excluded from the accompanying schedule.
Basis of Account ing
The expend it ures incl uded i n the accompany ing schedule were reported on the
modified accrua l bas is of ac cou nt ing . Under the modified accrual bas is of
accounting , expenditures are incurred when th e City becomes oblig ated for payment
as a resu lt of the receipt of the related goods and se rvices . Ex pend itures reported
inclu ded any property or equipment acq uisitions i ncurred under the federa l programs.
Schedule of Expend itures of Fede ra l Aw ards Pres entatio n
The Schedu le of Expenditures of Federa l Awards presented is prepared onl y fro m
the accounts of the City 's gra nt programs and , therefore , does not purport to present
the financial positio n or results of operations of the City . The City 's report ing ent ity is
defined i n Note 1 to the City's financial statements .
Rela tionship to Financ ial Statements
In accordance w it h the Go ve rnmental Accounti ng Standa rds Boa rd 's Stateme nt Nos.
61 and 39 , act ivi ties relat ing to all federa l financi a l ass ista nce programs are blended
in the City 's financial statements as special revenue funds .
Relationship to Fede ral Financ ial Reports
Gra nt expendi tu re reports as of June 30, 2014 , which have been submitted to grantor
agencies , will, in some cases, differ from amounts disc losed herein . The reports for
grantor agenci es are typically prepared at a later date and often refl ect refined
estimates of the year-end accrua ls .
MAJOR PROGRAM
T he follow in g Catalog of Federal Domes tic Assistance (CFDA ) pro gram was te sted
as a majo r program :
Highway Planning and Construction CFD A #20 .205
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City of Temple City
Schedule of Findings and Questioned Costs
Year ended June 30, 2014
Section I-Summary of Auditors ' Results
Fjnancjal Statements
Type of auditors ' report issued on the
financial statements
Internal control over financ ial reporting
Ma teria l weakness (es) identified
S ignifican t deficiency (ie s) identified
that are no t considered to be
material weaknesses
Noncompliance material to financia l
statements noted
Federal Awards
Internal control over its major programs
Materi al weakness(es ) identified
Significant defic iency(ie s) identified
that are not considered to be
materia l weak nesses
Type of a ud itors' report issued on compliance
for its maj or program
Any aud it findings disclo sed that are
requ ired to be reported in accordance
with Section 510(a) of OMB A-133
ldentjficatjon of Major program :
CFDA Nu mber
20.205
Dollar th res hold used to distingu ish between
T ype A and Type B programs
Auditee qualified as a low-risk auditee
Unmodified
No
Yes (FS 14-01 )
No
No
None reported
Unmodified
None
Name of Federa l Program
Highway Planning and Construction
$300 ,000
Yes
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City of Templ e Ci ty
Schedule of Findings and Questioned Costs
Year ended June 30 , 2014
Section II -Financial Statement Audit Findings
Finding FS 14-01 Year-end Adjustments
Criteria
Adequate effective internal control systems should be i n place to perm it the preparation of financia l
statements that fairly present financial activit ies and financial position .
Condition and Context
As part of the year-end process, there were a number of audit adjustments required to bring the
acco un t balances in to agreement with the supporting detail sche du les. Some of these adjustments
are considered essential to th e preparation of accurate financial statements .
Cause and Effect
While the Finance staff made great efforts to ensure that all closing entries were processed timely ,
challenges w ith resolving issues from the past such as up dat i n g the f i xed asset
accounts consumed a great deal of time and hindered the City 's ab ili ty to properly update the
accounting records , monitor them for accuracy , identify requ ired correct ions and make adj ustments
as necessary . The resulting undetected errors delayed the year-end clos ing of the books and , thus ,
the audit of those books .
Recommendation
To provide assurance of accurate interim financial reports and allow for the time ly generation of
reliable annual financial statements , we recommend the C ity perform month ly closing procedures by
analyzing the accuracy of the month-end account balances and correcting errors found during th is
process . Variances should be investigated before adjustments are made , and all adjustments shou ld
be reviewed by qualified Finance Department personne l. This procedure w ill substantiall y reduce the
amount of adjusting journal entries at year-end , improve the rel iability of interim fi nancia l statements
and allow for more timely completion of the annual fin a nc ial statements and independent aud it.
Views of Responsible Officials and Planned Corrective Action
The City will perform monthly closing procedures by analyzing the accuracy of the month-end account
balances and correcting errors found during this process . V ariances will be investigated before
adjustments are made and all adjustments will be approved by the Adm inistrative Services Director .
FS 14-02 Concentration of Credit Risk
Criteria
The investment pol icy of the City conta ins no limitation on the amounts that can be in vested in any
one issuer beyond that stipulated by the California Government Code . Under Section 53601 (h) of
the Cal iforn ia Government Code , the City is allowed to invest in negot iable cert ificates of deposit up
to 30% of the City 's total in vestments .
Condition and Context
During our audit, we noted that during fiscal year 2014 the C ity had invest ments in
negotiable certificates of deposit that were in excess of the 30 % lim it. The City 's investments in
negotiable certificates of deposit of $10 ,360 ,000 amounted to 38 .3% of the tota l City 's investments
of $27 ,119 ,280 as of September 30 , 2013 . The City 's investments in negotiab le certificates of
deposits of $6 ,462 ,000 amounted to 32 .3% of the City 's total investments of $19 ,989 ,841 as of
March 31 , 2014 . The City reduced its investments in negotiable certificates of deposit to be low the
30 % limit by June 30 , 2014 . Accord ingly , the City is in compliance as of June 30 , 2014 .
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Cause and Effect
City of Temple City
Schedule of Findings and Questioned Costs
Year ended June 30 , 2014
The City mistakenly classified the negotiable certificates of deposit as time deposits which have no
investme nt limit. Maintaining a large share of an investment portfolio in one type of investment
exposed the City to risk of loss of its investments in the event that the financial institution was unable
to fulfill the terms of the investment agreement.
Recommendation
We recommend that the City conti nue to monitor its investment portfolio to ensure it is in
compliance with its investment pol icy and the California Government Code .
Views of Responsible Officials and Planned Corrective Action
The City implemented the following to be in compliance w ith its investment policy by taking the
following actions:
• Cease in making any new i nvestments in negotiable cert ificates of deposit (NCD);
• When an NCD ma tures , the re-investme nt of the proceeds are either in another investment
instrument or utilized for liquidity purpose ; and ,
• Sold current NCDs in the portfolio prior to maturity at par or at a small gain .
Section Ill-Federal Award Findings
There were no federal award findings noted during the fiscal year ended June 30 , 2014 .
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City of Temple City
Status of Prior Year Audit Findings
Year ended June 30, 2014
Section IV-Status of Prior Year Findings
FS 13-01 Concentration of Credit Risk
Criteria
The inves tment pol icy of the C ity contains no limi tat ion on the amounts that can be invested in any
one issuer beyond that stipu lated by the California Government Code. Under Section 53601 (h ) of
the Ca lifornia Govern m en t Code, the City i s allowed to invest in neg otiable cert ificates of deposit up
to 30 % of the City 's total investments .
Condition and Context
During our audit, we noted that the City had in ves tments in negotiable ce rtificates of deposit that
were in excess of the 30 % limit. The City 's invest ments i n negotiable certificate s of deposit of
$11 ,096 ,069 amounted to 38 .7% of the to tal City 's investments of $28 ,702 ,528.
Cause and Effect
The City mistakenly classified the negotiable certificates of deposit as tim e deposits which have no
investment limit. Maintaining a large sha re of an investmen t portfol io in one ty pe of inve stmen t
exposes the City to risk of loss of its investments in the event that th e financial institu tion is unable to
fulfill the terms of the investment agreement.
Recommendation
We recommend that the City restru cture its in vestmen t po rtfo lio to be in compliance with its
investme nt po li cy .
Views of Responsible Officials and Planned Corrective Action
The City has i mp lemented the foll ow ing to be in compliance with its investment po licy by taking the
following action s:
• Cease in making any new i nvestments in negotiab le certificates of deposit (NCO );
• When an NCO ma tures , the re -investment of the proceeds are either in another investment
instrument or uti li zed for liqu idity purpose ; and ,
• Sold current NCDs in the portfolio prior to maturity at par or at a small gain.
The City has made every effort to bring the in vestments in NCDs below the 30% threshold once
becoming aware of the fin d ing .
Status
Implemented as of June 30 , 2014 .
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