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
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-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
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,-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 .
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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 .
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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
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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.
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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
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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?
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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 .
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City of Temple City
Schedule of Findings and Questioned Costs
Year ended June 30 , 2015
Section Ill -Federal Award Findings
No matters were reported.
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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.
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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.
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