HomeMy Public PortalAbout2017 Audit - Management Letter
CITY OF PARKVILLE, MISSOURI
REQUIRED COMMUNICATIONS
AND MANAGEMENT LETTER
For the Year Ended December 31, 2017
City of Parkville, Missouri
Required Communications and Compliance Report
For the Year Ended December 31, 2017
Table of Contents
Page
Number
Required Communications and Management Letter 1-5
Compliance Report:
Independent Auditor’s 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 Auditing Standards 6-7
Schedule of Findings and Responses 8
COCHRAN HEAD VICK & CO., P.C.
Certified Public Accountants
May 29, 2018
To the Honorable Mayor and
Board of Aldermen
City of Parkville, Missouri
We have audited the financial statements of the governmental activities, business-
type activities, each major fund, and the aggregate remaining fund information of the
City of Parkville, Missouri (the City) for the year ended December 31, 2017.
Professional standards require that we provide you with information about our
responsibilities under generally accepted auditing standards and Government
Auditing Standards, 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
August 1, 2017. Professional standards also require that we communicate to you the
following information related to our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting
policies. The significant accounting policies used by the 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 2017. We noted no
transactions entered into by the City 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. Significant accounting estimates used by the City’s
management include determining the allowance for doubtful accounts, the estimated
historical cost of infrastructure and the related estimated useful lives used in
recording depreciation and accumulated depreciation for capital assets, value of land
held for redevelopment, and the estimated obligation relating to pension benefits. We
evaluated the key factors and assumptions used in developing the above estimates in
determining that they are reasonable in relation to the financial statements taken as a
whole.
Certain financial statement disclosures are particularly sensitive because of their
significance to financial statement users. The most sensitive disclosure affecting the
financial statements was the disclosure of certain special assessments in Note 7 to
the financial statements.
The financial statement disclosures are neutral, consistent and clear.
1251 NW Briarcliff Pkwy
Suite 125
Kansas City, MO 64116
(816) 584-9955
Fax (816) 584-9958
Other Offices in
Missouri and Kansas
Difficulties Encountered in Performing the Audit
We encountered no 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 clearly trivial, and communicate them to the appropriate level of
management. Management has corrected all such misstatements. The following material misstatement
detected as a result of our audit procedures was corrected by management.
Adjustment to record all proceeds from issuance of the loan agreement of $1,329,725.
Disagreements with Management
For purposes of this letter, a disagreement with management is 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 May 29, 2018.
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 City’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 City’s auditors. However, these discussions
occurred in the normal course of our professional relationship and our responses were not a condition to
our retention.
Other Matters
We applied certain limited procedures to the City’s management’s discussion and analysis, budgetary
comparison information, schedule of changes in net pension liability and related ratios and schedule of
employer contributions, which are required supplementary information (RSI) that supplements the basic
financial statements. Our procedures consisted of inquiries of management regarding the methods of
preparing the information and comparing the information for consistency with management’s responses to
our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic
financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on
the RSI.
We were engaged to report on the combining and individual fund statements and schedules which
accompany the financial statements but are not RSI. With respect to the supplementary information
accompanying the financial statements, we made certain inquiries of management and evaluated the form,
content, and methods of preparing the information to determine that the information complies with
accounting principles generally accepted in the United States of America, the method of preparing it has not
changed from the prior period, and the information is appropriate and complete in relation to our audit of the
financial statements. We compared and reconciled the supplementary information to the underlying
accounting records used to prepare the financial statements or to the financial statements themselves.
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In planning and performing our audit of the financial statements of the governmental activities, the business-
type activities, each major fund, and the aggregate remaining fund information of the City of Parkville,
Missouri as of and for the year ended December 31, 2017, in accordance with auditing standards generally
accepted in the United States of America, we considered the City’s internal control over financial reporting
(internal control) as a basis for designing our auditing 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 discussed below, we identified certain deficiencies in internal control that we
consider to be material weaknesses.
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 entity’s
financial statements will not be prevented, or detected and corrected on a timely basis. We consider the
deficiency in the City’s internal control described under Financial Reporting to be a material weakness.
As part of our annual audit, we try to identify opportunities for improving the management of financial
resources and for improving the internal controls over financial reporting. We are submitting, for your
consideration, our observations and recommendations with regard to these matters.
Management’s responses to our comments are included with this report. We did not audit the City’s
responses and, accordingly, we express no opinion on them.
CURRENT YEAR COMMENTS
Financial Reporting – Material Weakness
Management is responsible for establishing, maintaining and monitoring internal controls over financial
reporting, and for the fair presentation of the financial statements and related notes in conformity with U.S.
generally accepted accounting principles. Under our professional standards, we have to assess the City’s
controls over preparing the financial statements including assessing the skills and competencies necessary
to prevent, detect, and correct a material misstatement.
Our audit procedures identified an adjustment that was required to properly report a certain transaction of
the City in accordance with generally accepted accounting principles. This adjustment was not initially
identified by the City’s internal controls over financial reporting.
We recommend that management review year-end closing procedures to ensure that transactions are
properly recorded in accordance with generally accepted accounting principles. In addition, due to the
complexities of financial reporting, we recommend that management explore various alternatives for
improving the controls over financial reporting including the use of governmental accounting standards,
reference guides and continuing education and training courses.
Management’s Response
Staff and the Board of Aldermen responded to the recommendation and, since that time, have increased
the budget and time available for professional development for finance staff with the idea of both the
Finance/Human Resources Director and the City Treasurer attending relevant training opportunities. The
Finance/Human Resources Director attended the Generally Accepted Accounting Principles (GAAP)
Update Webinar to learn about the most recent developments in accounting and financial reporting for state
and local governments as well the National Government Finance Officer of Missouri (GFOA) Conference
held this year in St. Louis, Missouri. He attended sessions including Accounting and Financial Reporting for
Debt, Improving Communication between Accounting and Budgeting and Debt Management Best Practices.
The City Treasurer attended the National GFOA Conference as well and attended classes including
Accounting and Auditing Year in Review, Treasury Management Best Practices, Small Government Forum
and Establishing an Investment Program.
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With regard to audit adjustments, the loan agreement was not recorded in its entirety and all funds received
by the City were not accurately reflected. This was an oversight. Staff will do a better job of working with our
auditors during the year as questions arise that they might be able to provide direction on. Audit
adjustments have decreased each year and staff will continue to strive for no audit adjustments in the
future. Staff will use all available reference guides to provide a checklist of tasks to ensure accurate and
timely financial reporting Staff understands that the City is ultimately accountable for the accuracy of the
financial statements and will endeavor to increase the in-house knowledge of governmental accounting
standards to improve this reporting process in the future.
Other Comments
Municipal Court
The Municipal Court collects fines and court costs and deposits those funds into a bank account. The
monies collected are to be distributed to the State of Missouri, the City of Parkville or other agencies in
accordance with State Statute and City Ordinances. It was noted during the audit that the bank account
carried an account balance of $10,673 as of December 31, 2017. The Court could not provide a detail of the
amounts owed to the entities described above for the amount remaining in the fund. We recommend that
the City reconcile the remaining amount in the fund to ensure that fines and court costs collected are
appropriately distributed in accordance with state and municipal regulations.
Management’s Response
Court and finance staff have been unable to determine the source and the appropriate distribution of these
funds. A new account has been opened and once all activity has ceased in the existing account, the
account will be closed and funds distributed. Finance staff has contacted the State of Missouri for direction
in the proper distribution of these funds. Court staff and Finance staff currently reconcile bank accounts
manually each month jointly and accounts will be reviewed to ensure all balances are accurate.
Future Accounting Pronouncements
The Governmental Accounting Standards Board (GASB) has recently issued the following statements which
may impact the City’s financial reporting requirements in the future:
GASB Statement 75 – Accounting and Financial Reporting for Postemployment Benefits Other
Than Pensions, effective for the fiscal year beginning on January 1, 2018.
GASB Statement 83 – Certain Asset Retirement Obligations, effective for the fiscal year beginning
on January 1, 2019.
GASB Statement 84 – Fiduciary Activities, effective for the fiscal year beginning on January 1,
2019.
GASB Statement 85 – Omnibus 2017, effective for the fiscal year beginning on January 1, 2018.
GASB Statement 86 – Certain Debt Extinguishment Issues, effective for the fiscal year beginning
on January 1, 2018.
GASB Statement 87 – Leases, effective for the fiscal year beginning on January 1, 2020.
GASB Statement 88 – Certain Disclosures Related to Debt, including Direct Borrowings and Direct
Placements, effective for the fiscal year beginning on January 1, 2019.
We recommend management review these standards to determine the impact they may have on the City’s
financial reporting.
Management’s Response
City staff will review all recent and upcoming GASB statements and ensure that any required changes are
incorporated in future financial reporting.
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PRIOR YEAR COMMENTS
In the prior year, we issued certain comments and recommendations in regard to the City’s accounting,
internal control and financial reporting issues. The following table summarizes the nature of these
comments, the significance of the comments as described in the prior year’s reports, and our determination
of the status of those comments.
Prior Year Comment
Description Significance Current Year Status
Financial Reporting We identified several adjustments that were required to properly report certain
transactions in accordance with generally accepted accounting principles. We
recommended that management review year-end closing procedures to ensure
that transactions are properly recorded and approved in accordance with
generally accepted accounting principles.
Improvements continue to be made to the
year end closing processes, the comment
is repeated as a material adjustment was
required to properly report the lease
purchase agreement proceeds in
accordance with generally accepted
accounting principles.
Municipal Court During our audit we noted that the bank account for the Municipal Court fines
carried a balance at year end. The balance is owed to various agencies based
on State Statute and City Ordinances but details of the amounts owed to each
agency was not provided. We recommend that the City reconcile the remaining
amount in the fund to ensure that fines and court costs collected are
appropriately distributed in accordance with state and municipal regulations.
Comment repeated.
Budgeting During our audit we noted a fund where actual expenditures exceeded budgeted
appropriations. We recommended that management review its processes and
procedures for monitoring and amending the budget.
Comment resolved.
Sewer Allowance for Doubtful
Accounts
During our audit we noted that the City's sewer accounts receivable consisted of
several outstanding balances that were deemed uncollectible. The City was not
able to generate a historical aged accounts receivable trial balance form the
utility billing system. We recommended that management periodically analyze
and review the receivable accounts to identify accounts that are uncollectible. We
also suggested that the City review their collection efforts and monitoring of slow
paying or past due accounts to improve all collections.
Comment resolved.
This report is intended solely for the information and use of the Mayor and the Board of Aldermen and the
management of the City, and is not intended to be and should not be used by anyone other than these
specified parties.
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COMPLIANCE REPORT
COCHRAN HEAD VICK & CO., P.C.
Certified Public Accountants
Independent Auditor’s 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 Auditing Standards
To the Honorable Mayor and Board of Aldermen
City of Parkville, Missouri
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, the business-type
activities, each major fund, and the aggregate remaining fund information of the City
of Parkville, Missouri (the City), as of and for the year ended December 31, 2017, and
the related notes to the financial statements, which collectively comprise the City’s
basic financial statements and have issued our report thereon dated May 29, 2018.
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.
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
entity’s financial statements will not be prevented, or detected and corrected on a
timely basis. 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.
Our consideration of internal control was for the limited purpose described in the first
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 have not been identified. We did
identify a certain deficiency in internal control described in the accompanying
schedule of findings and responses as item 2017-001 that we consider to be a
material weakness.
1251 NW Briarcliff Pkwy
Suite 125
Kansas City, MO 64116
(816) 584-9955
Fax (816) 584-9958
Other Offices in
Missouri and Kansas
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.
The City’s Response to the Findings
The City’s response to the finding identified in our audit is described in the accompanying schedule of
findings and responses. The City’s response was not subjected to the auditing procedures applied in the
audit of the financial statements and, accordingly, we express no opinion on it.
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 entity’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 entity’s internal control and compliance. Accordingly,
this communication is not suitable for any other purpose.
Kansas City, Missouri
May 29, 2018
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City of Parkville, Missouri
Schedule of Findings and Responses
For the Year December 31, 2017
2017-001 Financial Reporting
Condition
Our audit procedures identified adjustments that were required to properly report certain transactions of
the City in accordance with generally accepted accounting principles. These adjustments were not initially
identified by the City’s internal controls over financial reporting.
Criteria
Internal controls should be in place to ensure year-end balances and external financial reporting conforms
to generally accepted accounting principles.
Cause
Year-end procedures were not sufficient to identify the adjustments noted above in a timely manner.
Effect
Potential exists for material misstatements to the financial statements.
Recommendation
We recommend that management review year-end closing procedures to ensure that transactions are
properly recorded in accordance with generally accepted accounting principles. Additionally, due to the
complexities of financial reporting, we recommend that management continue exploring various
alternatives for improving the controls over financial reporting including the use of governmental
accounting standards, reference guides and continuing education and training courses.
Management’s Response/Corrective Action
Staff and the Board of Aldermen responded to the recommendation and, since that time, have increased
the budget and time available for professional development for finance staff with the idea of both the
Finance/Human Resources Director and the City Treasurer attending relevant training opportunities. The
Finance/Human Resources Director attended the Generally Accepted Accounting Principles (GAAP)
Update Webinar to learn about the most recent developments in accounting and financial reporting for
state and local governments as well the National Government Finance Officer of Missouri (GFOA)
Conference held this year in St. Louis, Missouri. He attended sessions including Accounting and Financial
Reporting for Debt, Improving Communication between Accounting and Budgeting and Debt
Management Best Practices. The City Treasurer attended the National GFOA Conference as well and
attended classes including Accounting and Auditing Year in Review, Treasury Management Best
Practices, Small Government Forum and Establishing an Investment Program.
With regard to audit adjustments, the loan agreement was not recorded in its entirety and all funds
received by the City were not accurately reflected. This was an oversight. Staff will do a better job of
working with our auditors during the year as questions arise that they might be able to provide direction
on. Audit adjustments have decreased each year and staff will continue to strive for no audit adjustments
in the future. Staff will use all available reference guides to provide a checklist of tasks to ensure accurate
and timely financial reporting Staff understands that the City is ultimately accountable for the accuracy of
the financial statements and will endeavor to increase the in-house knowledge of governmental
accounting standards to improve this reporting process in the future.
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