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HomeMy Public PortalAbout10) 7G Single Audit ReportAGENDA ITEM 7.G. ADMINISTRATIVE SERVICES DEPARTMENT MEMORANDUM DATE: January 19 , 2016 TO: The Honorable City Council FROM: Bryan Cook , City Manager By: Tracey L. Hause , Administrative Services Director SUBJECT: SINGLE AUDIT REPORT RECOMMENDATION: It is recommended that the City Council receive and file the Single Audit Report (Attachment "A ") for the year ended June 30, 2015 . BACKGROUND: 1. On August 2 , 2011 , the City Council approved a Profess iona l Services Agreement with Vasquez & Company, LLP for audit ing services for three yea rs with two one-year options . Vasquez & Company, LLP completed auditing services for all three f iscal years ending June 30 , 2011 , June 30 , 2012 , and June 30 , 2013 . 2 . On June 17, 2014, the City Council approved the first amendment to the Consultant Services Agreement with Vasquez & Company, LLP for a one year extension providing for accounting and auditing services for FY 2013-14 . 3. On April 7 , 2015 , the City Council approved an amendment to the Consultant Services Agreement with Vasquez & Company, LLP , for a second one year extension providing for auditing services for the period ending June 30 , 2015 . 4 . On June 3, 2015 , the Administrative Services Department received notice from the Government Finance Officers ' Association (GFOA) that the City had received the Excellence in Financial Report Award program for the FY 2012-13 CAFR. 5. On July 10, 2015 , the Audit Standing Committee met with City staff and audit staff from Vasquez & Company, LLP , and reviewed the planned engagement for the independent audit for the FY Ending June 30 , 2015 . 6 . On October 16 , 2015 , Vasquez & Company completed the their field work. City Council January 19, 2016 Page 2 of 2 7. On October 30 , 2015, the Audit Standing Committee once again met with City staff and audit staff from Vasquez & Company , LLP , and discussed the results of the field work as it related to the Singel Audit. ANALYSIS: As a recipient of Federal grant funds in excess of $500,000 , the City is requ ired 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) pronounced 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 aud it 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 , 2016). The City Council is requested to receive and file the Single Audit Report so that staff can transmit the Single Audit Report to the Federal reporting agencies by March 31 , 2016 . CITY STRATEGIC GOALS: The City's 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 will further the City's Strategic Goal to promote Good Governance . FISCAL IMPACT: This action of receiving and filing the Single Audit does not have a fiscal impact on the FY 2015-16 City Budget. ATTACHMENT: A. Single Audit for the Year Ended June 30 , 2015. Single Audit Report City of Temple City, California Year ended June 30, 2015 ATTACHMENT A with Reports of Independent Auditors ' MCGLADREY ALLIANCE ! McGiadrey -P'ii Vasauez l!j-& ComPanY LLP Certifi•d Publ r Ac V t •nd Bu ~ Cc- Single Audit Report City of Temple City, California Year ended June 30, 2015 with Reports of Independent Auditors REPORTS OF INDEPENDENT AUDITORS Report of I ndependent Auditors on Internal Control Over Financial Report ing and on Compliance and Other Matters Based on an Audit of Financia l Statements Performed in Accordance with Government Auditing Standards Report of Independent Auditors on Compl iance For Eac h Major Federal Program, on Inte rn al Control Over Compliance, and on the Schedu le of Expenditures of Federa l Awards Req uired by OMS Circula r A-133 SCH EDULE 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 Ci ty Table of Contents 3 6 7 8 11 -9 Vasauez W ~ &ComPanY LLP (f'rtltie-d Pub ~ c u , .. •!. ;md Busmess Cc .v ., 801 SOUth Grand Ave., sun e 400 Los Angeles, CA 90017 Ph. (213) 813·1700 Fax(213)873-1777 www.vasquezcpa.com OFACE LOCA110NS : Lo s An ,elos Sacr ome nto San Diogo Report of Independent Auditors 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 The Honorable Mayor and members of the City Council City of Temple City, California We have aud ited , in accordan ce with the auditing standards generally acce pted in the Un ited States of America and the standards applicable to fin an cial audits contained i n Go ve rnm ent Auditing Standards issue d by the Comptroller Gen eral of the United States , the financial statements of the governmenta l activities, the business-type activities , each majo r fund , and the aggregate remaining fund in format io n of the City of T emple City , Ca lifornia (t he City), as of and for the year ended June 30, 2015 , and the related notes to the fi nan ci al statements , w hi ch collectively comprise the C ity's basic financial statements, and have issued our report thereon dated De cember 16, 201 5. Internal Control Over Financial Reporting In planning and performing our audit of the finan cial statemen ts, we con sidered th e City's internal co nt rol over financial reportin g (internal control ) to determi ne the aud it procedures that are appropriate i n the circumstan ce s for the purpose of expressing our opin ions on the financial sta tements , but not for the purpose of express ing an opinion on the effectivenes s of the City's i nternal control. Accordingly , we do not exp ress an opinion on th e effectiveness of the City's internal con trol. A deficien cy in internal con trol exists when the design or operation of a co ntrol does not allow managemen t or emp loy ees , i n the norma l course of performi ng th eir assigned functi ons , to prevent, or detect and co rrect, misstatements on a time ly bas is. A materia l weakness is a deficiency, or a combination of deficiencies , in internal co nt rol, su ch that there is a re asonab le possibi lity that a mate rial misstatement of the entity 's financial statements wi ll not be preven ted , or detected and corrected on a timely bas is. A significant deficiency is a deficiency, or a combination of deficiencies, in interna l control that is less severe than a material weak ness , yet important enough to merit attention by those charged with governance . Ou r con siderat io n of interna l control was for th e limited purpose descri bed in t he first paragraph of th is section and was not des igned to iden tify all deficiencie s in internal con tro l that mi ght be material weaknesses or significant deficiencies. Given t hese lim itations , during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However , material weaknesses may exist th at have not bee n id entified . Compliance and Other Matters As part of o btaining reasonable assurance about whether t he City's financia l statements are free from material m isstatement , we performed tests of its compliance with certain provisions of laws , regulations , contra cts , and grant agreements , noncompliance with wh ich co uld have a direct and material effect on the determination of financial stateme nt 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 . Th e results of our tests disclosed no instances of noncompli ance or oth er matters that are required to be reported unde r Government Auditing Standards. Purpose of this Report The purpose of this report is sole ly 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 con trol or on compliance. Thi s 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 su itable for any other purpose. Los Angeles , California December 16, 2015 LL f 2 ,-1 I I -R Vasauez l'J ~ &C omPan Y L L P Cerhhed Publ f. "'~u •t. r d Bu ine~s C 'l'-1t. r 801 SouthGrand Av e .,Sulte 400 Lo s Angeles, CA 90017 Ph. (n3) 873·1 700 Fax (n3) 873-1 777 www.vasquezcpa.com O FFICE LO CATIONS: Los Angeles Sacr amento Sa n Diego Report of Independent Aud itors on Complianc e For Each Major Federal Program, on Internal Control Over Compliance, and on the Schedule of Expenditures of Fed eral Awards Required by OMB Circul ar A -133 The Honorable Mayor and members of the C i ty Council City of Temple City, California Report on Compliance for Each Major Federa l Program We have audited t he City of Temple City, Californ ia's (the City ) compliance with the types of compl ian ce require me nts described in the OMB Circular A-133 Complianc e Supplement that could have a direct and material effect on the City's major federal programs for the year ended June 30 , 2015. T he City 's major fede ral programs are identified in the summary of auditors' results section of the accompanying sc hedule of find ings and quest io ned cost s. Management's Responsibility Management is responsible f or comp li ance with the requirements of laws , regulation s, contracts, and grants app licable to its federa l programs . Audi tors ' Responsibility Our responsibility is to express an op1mo n on compliance for ea ch of the Ci ty 's major fede ral program s based on our aud it of the types of compliance requ irem ents referred to above . We conducted our aud it of compliance in accordance with auditing standard s genera ll y accepted in the United States of America ; the standards app licabl e to financial audits contained in Government Auditing Standards , issued by th e Comp troll er Gene ral of the United States ; and OMB Circu la r A- 133 , Audits of States, Loca l Governmen ts, and Non-Profit Organizations. T hose standards and OMB Circular A-133 requ ire th at we plan and perform the audit to obtain reasonable assurance about whether no nco mplian ce with the types of compliance requ iremen ts re ferred to above that could have a di rect and material effect o n a major federal prog ram occur red . An audit includes exam ining , on a test bas is , evidence abou t the City 's com pliance with those requireme nts and pe rforming such othe r procedures as we considered necessary in the ci rcumstances . We believe that our audit provides a reasonab le basis for our op i nion on com pli ance for each major federal program . Howeve r, our audit does not provide a legal de terminat io n of the City 's compl ian ce . Opinion on Each Major Federal Program In our opinion , the City complied , in all material respe cts , with th e types of co mpliance requirements referred to above that could have a direct and material effect on ea ch of its major federal programs for the year ended Ju ne 30 , 2015 . 3 Report on Internal Control Over Compliance Management of the City is responsible f or es tabli shi ng and maintaining effective intern al co ntrol over compliance with the types of com pliance requirements referred to above. In planni ng and performing ou r audit of compliance, we considered the City 's internal control over complia nce 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 th e circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on in ternal control over compliance in accordance w ith OMS Circular A-133 , but not for the purpose of expressing an opinion on the effectiveness of intern al contro l ove r compliance . Accord ingly , we do not express an opi ni on on the effectiv eness of the City's internal con tro l over com pli ance. A deficiency in internal control over compliance exists when the design or ope ration of a contro l over compliance does not all ow management or employees , in th e normal course of performing th eir ass igned functions , to prevent , or detect and correct, noncomp liance with a type of comp li ance req uirement of a federal program on a timely basis . A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in interna l control over compliance , such that there is a reasonable possibil ity that materia l non complia nce wi th a type of complia nce requ irement of a federal program will not be prevented , or detected and corrected , on a tim ely basis . A significant deficiency in internal control over complia nce is a deficiency, or a combination of deficiencies , in internal control over co mpliance with a type of compliance requirement of a federal program that is less severe than a materia l weakn ess in internal con trol over com pliance , yet im portant e nough to merit attention by those charge d with governa nce . Our consideration of internal control ove r compliance was for the li mited purpose des cribed in the first pa ragraph of this section and was not designed to identify all deficiencies in internal con trol over compliance that migh t be material weaknesses or significant deficie ncie s. We did not identify any deficien cies in interna l control over compliance that we cons ider to be material weak nesses . However, ma terial weaknesses may exist that have not been identified . Th e purpose of this report on internal control over compliance is solely to describe the scope of our testing of interna l contro l over compliance and the results of that testing based on the requirements of OMS Circular A -133. Accordingly , th is report is not suitable for any other pu rpose . 4 Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 We have audited the financial statements of the governmental activities, the business-type activ ities , each major fund , and the aggregate remaining fund information of the C ity as of and for the year ended June 30 , 2015, and the related notes to the fin ancial statements , which collectively comprise the City 's basic financial stateme nt s. We issued our report thereon dated December 16, 2015 , which conta ined unmo dified opinions on those financial stateme nts. Our audit was conducted for the purpose of forming opinions on the financial statements that co ll ectively comprise the basic financial statements . The accompanying schedule of expenditures of federal awards is presented for purposes of add itiona l 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 financ ial statements . The information has been subjected to the auditi ng procedures applied in the aud it of the financial statements and certain additional procedures , including comparing and reconciling such information directly to the underlyi ng accounting and other records used to prepare the basic financial statements or to the basic financia l statements themselves , and other additiona l procedures in accordance with audi ti ng standards ge ne rally accepted in th e Uni ted States of America . In our opinion , the schedule of expenditures of federa l awards is fairly stated in all ma ter ial respects in relation to th e basic financial statements as a whole. Los Angeles , California December 16, 2015 LL f 5 City of Temple City Schedule of Expe nditu res of Federal Awards Year ended June 30, 2015 Fe d eral Grant or/Pass Thro ugh G ran t or/Program T itle U.S. Department of Housing an d Urban Dev elopmen t Passed-th rough Coun ty of Los Angeles : Housing Rehabilita tion Loan Program Asbestos and Lead-Based Paint Testing and Aba teme nt Program Community Developme nt Bl ock GranVEntitlement Grant Direct Assistance Temple City Boulevard Curb Cut s City Parking Lot ADA Improveme nts Total U.S. Depa rtme n t of Housing and Ur ban Development U.S. Department of Tra n s po rtat ion Passed-through State of Californ ia Department of Transporta tion Hghway Planning and Construction Total U.S. Depa rtme n t of Transportation Tota l Federal Expenditures • Major Program Ca t al og o f Fe d e ra l Dome stic Assistance N umbe r 14.218 14.218 14.218 14.218 14.21 8 20 .205 Program Federal Identificati o n Award Number Expenditu r es 096756-14 $ 155,639 600604-14 35 ,161 097755-14 26 ,166 601595-13 119,321 601596-13 11 ,879 34 8 166 CML-5365(007) 740 801 74 0 801 $ 1,088,967 See notes to schedule of exp enditure s of fe d e ra l awards and the report of independent auditors on compliance for each major f ederal program on internal control over compliance and on the schedule of expe nditures of federal awards required by OMB Circ ular A -133. 6 NOTE 1 NOTE2 City of Temple City Notes to Schedule of Expenditures of Federal Awards Year ended June 30, 2015 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Scope of Presentation The accompanying Schedule of Expenditures of Fed eral Awards (SEFA) presents only the expenditures inc ur red by t he City of T emple C ity , Californ ia (the City ) that are reimbursable under programs of federa l agencies providing financial awa rds. For purpose s of this sched ul e, financial awards include federal awards received directly from a federa l age ncy and federal funds received ind irectly by the City from a nonfederal agency or other organiza ti on . On ly the portion of program expenditures reimbursable wi th federal funds is rep orted in the accompanying schedu le. Program expenditures in excess of the maximum reimbursement authorized or the portion of the program expe nd itures that were funded w ith other state , local or other nonfederal fu nds , if any , are excluded fro m the accompanying schedule . Basis of Accounting The expend iture s included in the accompanying schedule were reported on the modified accrual bas is of accounting . Under the modified accrual bas is of accounti ng , expenditures are in curred whe n the City becomes obl igated for payme nt as a result of the re ceipt of the related good s and services. Expenditu res reported included any property or equipment acquisi t ions incurred u nd er the federal programs . Schedule of Expenditures of Federal Awards Presentation The SEFA presente d is prepared only from the accounts of the City's grant programs and , therefore , does not purport to present the financial position or resu lts of operations of the City . The City 's reporting entity is defined in Note 1 to the City's finan ci al stateme nts . Relationship to Financial Statements In accordance with the Governmental Accounting Standards Board 's Statement Nos. 39 and 61 , activi ties re lating to all federa l finan cial assistance prog rams are blended in the City 's financ ial statements as special revenue funds . Relationship to Federal Financial Reports Gra nt expenditure reports as of June 30 , 201 5, wh ic h have been subm itted to grantor agencies, will , in some cases , differ from amounts disclosed here in. The reports for grantor age ncies are ty pical ly p re pa re d at a later date and often reflect refined estimates of the yea r-end accruals . MAJOR PROGRAMS The fo llowing Catalog of Fed eral Domestic Assistance (CFDA) prog rams were tested as maj or programs: Co mmunity Development Blo ck Grants/Entitlement Grants Highway Plann ing and Construction 7 CF DA #14 .218 C FDA #20.205 City of Temple C ity Schedule of Findings and Questioned Costs Year ended June 30, 2015 Section I-Summary of Auditors ' Results Ejnancjal Statements T ype of auditors' report issued on the financial statements: Internal control over financial reporting : Material weak ness(es) identified? Significant defi ciency (ies) identified ? Noncompliance mate rial to financial statements noted? Federal Awards Internal control over its major programs: Material weakness(es) identified? Significant deficiency(ies) identified? Type of auditors' repo rt issued on compl ia nce for its major prog ram s: A ny audit findings disclosed t hat are required to be repo rt ed in accordance with Section 510(a) of OMB A-133? ldentjfjcatjon of Major Programs: C FDA N umber 14.218 20.205 Dollar threshold used to distinguish between T ype A and T ype B p rograms : A uditee qualified as a low-risk auditee? 8 Un modified No N one reported No No None reported Un mod ified No Name of Federal Program or Cluster Community Development Block Grants/ Entitlement Grants Highway Planning and Construction $300 ,000 Yes City of Temple City Schedule of Findings and Questioned Costs Year ended June 30 , 2015 Section II-Financial Statement Findings No matters we re reported . 9 City of Temple City Schedule of Findings and Questioned Costs Year ended June 30 , 2015 Section Ill -Federal Award Findings No matters were reported. 10 City of Temple Ci ty Status of Pri or Year Audit Find i ngs Year ended June 30 , 2015 Section IV-Status of Prior Year Findings Finding FS 14-01 Year-end Adjustments Criteria Adequate effective internal control systems should be in place to permit the preparation of financial sta tements that fai rly present financial activities and financial position . Condition and Contex t As part of the year-e nd process, there we re a number of audit adjustments required to bring the account balances in to agreement with the supporting detail schedules. Some of these adjustments are considered essen tia l to the prepara tio n of accurate financial statements. Cause and Effect W hile the Finance staff made great efforts to ensure that all clos ing entries were processed timely , cha llenges with reso lvi ng issues from the past such as updating the fixed asset accounts consumed a great deal of time and hindered the City 's ability to properly update the accounting records , monitor them for accuracy , iden t ify required corrections and make adjustments as necessary. The resulting u ndetected errors delayed the year-end closing of the books and , thus , the audit of those books . Recommendation To provide assura nce of accurate interi m financial reports a nd all ow for t he timely generation of re lia ble annual financial statements , we recommend the C ity perform month ly closing procedures by analyzing the accu racy of the month-end account balances and correct ing erro rs found during this p rocess. Variances sh ould be investigated before adjustments are made , and all adjustments should be reviewed by qualified Finance Department personnel. This procedure will substantially reduce the amount of adjusting jou rnal entries at yea r-end , improve the reliabi li ty of interim financia l statements and allow for more timely completion of the annual financial statements and independent aud it. Views of Responsible Officials and Planned Corrective Action Th e City will perform monthly closing procedu res by analyzing the accuracy of the month -end account balances and correcting errors found duri ng this process. Variances w ill be invest igated before adjustments are made and all adjustments will be approved by the Administrative Services Director. Status Implemented as of Ju ne 30 , 2015. 11 FS 14-02 Concentration of Credit Risk Criteria City of Temple City Status of Prior Year Audit Fi ndings Year ended June 30, 2015 The investment pol icy of the City con tains no limitation on t he amounts that ca n be invested in any one issuer beyond th at stipulated by the California Government Code . Under Section 53601 (h ) of the California Government Code, the City is allowed to invest in negotiable certificates of deposit up to 30 % of the City's total investments . Condition and Contex t During our audit, we noted that during fi sca l year 2014 the City had investments in negotiable certificates of deposi t that were in excess of the 30% limit. Th e City 's investme nts in negotiable certificates of deposit of $10,360 ,000 a mo unted to 38 .3% of the total City 's investments of $27,119 ,280 as of September 30 , 2013. T he Ci ty's i nvestments in nego t iable ce rt ifi cates of deposi ts of $6,462,000 amou nted to 32.3 % of t he City's to tal investmen ts of $19 ,989 ,841 as of March 31, 2014 . Th e City reduced its investments in nego tiab le certificates of deposit to be low the 30% limit by June 30 , 2014 . According ly , the City is in comp li ance as of June 30 , 20 14 . Cause and Effect T he City mistaken ly classified the negotiab le certificates of deposit as time deposits which have no investment limit. Maintain ing a large share of an investmen t portfolio in one type of investment exposed the City to r isk of loss of its investments in the event that the financial institu t ion was unable to fu lfill the terms of th e investment agreeme nt. Recommendation W e recomme nd that th e City conti nu e to monitor its investm ent portfoli o to ensure it is in compliance w ith its investment po licy and the California Government Code . Views of Responsible Officials and Planned Corrective Action The City implemented the following to be in compliance wit h its investment policy by taking the following actions: • Cease in maki ng any new investmen ts in negotiable certifica tes of deposit (NCO); • When an NCO matures, the re-inves tm en t of the procee ds a re either in anoth er investment instru ment o r utili zed fo r li qu idity p urpose; and , • Sold curre nt NCDs in the portfoli o pri or to ma tur ity at par or at a small ga in . Status Implemented as of J une 30 , 2015. 12 www. vasq uezcpa .com Vasquez & Company LLP has over 45 years of experience in performing audit. accounting & consult1ng services for all types of nonprofit organizations. for-profit companies , governmental entities and publically traded companies. Vasquez is a member of the McGiadrey Alliance. McGiadrey Alliance is a premier affiliation of independent accounting and consulting firms. McGiadrey Alliance provides its members with access to resources of RSM US L LP (formerl y known as McGiadrey LLP). McGiadrey Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP . RSM US LLP is the U.S . member firm of RSM International. a global network of independent audit, tax, and consulting firms . Visit http.//www.rsmus .com/aboutus for more information regarding RSM US LLP and RSM International. McGiadrey®. the McGiadrey Alliance logo and the McGiadrey Alliance signatures are proprietary to RSM US LLP, while RSMTM is used under license by RSM US LLP. 801 South Grand Ave nue, S uite 400 • Los Angeles. California 90017-4646 • Ph. (213) 873-1700 • Fax (213) 873-1777