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HomeMy WebLinkAboutCC AG PKT 2014-01-27 #E j�F SEA(;�;•ti. AGENDA STAFF REPORT f c 4, DATE: January 27, 2014 TO: Honorable Mayor and City Council THRU: Jill R. Ingram, City Manager FROM: Victoria L. Beatley, Director of Finance/City Treasurer SUBJECT: CITY OF SEAL BEACH ANNUAL REPORTS FOR FISCAL YEAR ENDED JUNE 30, 2013 SUMMARY OF REQUEST: Staff recommends that the City Council receive and file the following annual report for fiscal year ended June 30, 2013: A. Audit Communication Letter; B. Report on Internal Control; and C. City of Seal Beach Comprehensive Annual Financial Report (CAFR). BACKGROUND AND ANALYSIS: The audit firm of Lance, Soll & Lunghard LLP, has completed the annual audit of the City of Seal Beach (City) for the fiscal year ended June 30, 2013. The audit was conducted in accordance with generally accepted auditing standards and included examining, on a test basis, evidence supporting the amounts and disclosures to obtain reasonable assurance that the financial statements are free of material misstatements. In the opinion of the auditors, the financial statements fairly present, in all material respects, the financial position of the City of Seal Beach at June 30, 2013. The 2013 CAFR (Attachment C) is included for your information and use. The CAFR was submitted to the Government Finance Officers Association. The purpose of the Audit Communication Letter (Attachment A) is to provide a mechanism for communication with the governing body highlighting significant issues that may arise during the audit process. As indicated, the City's financial statements were clearly presented. The purpose of the Report on Internal Control (Attachment B) is to help the auditor in designing audit procedures for the purpose of expressing an opinion on the financial statements. Agenda Item E The Council Audit Committee reviewed and discussed these items at a meeting on January 23, 2014. ENVIRONMENTAL IMPACT: This action is exempt from the California Environmental Quality Act, because it is not defined as a "project" under CEQA. LEGAL ANALYSIS: Legal Counsel has reviewed and approved as to form. FINANCIAL IMPACT: There is no financial impact in receiving this information. RECOMMENDATION: That the City Council, receive and file the following for fiscal year ended June 30, 2013: the Audit Communication Letter, the Report on Internal Control, and the CAFR. SUBMITTED BY: NOTED AND APPROVED: Victoria L. Beatley J6V Ingram, City a ager Director of Finance/City Treasurer Attachments: A. Audit Communication Letter B. Report on Internal Controls C. City of Seal Beach Comprehensive Annual Financial Report (CAFR) Page 2 Attachment A •David E.Hale,CPA,CFP •Bryan S.Gruber,CPA --REVISED-- •Donald G.Slater,CPA •Deborah A.Harper,CPA LSL •Richard K.Kikuchi,CPA •Gary A.Cates,CPA •Susan F.Matz,CPA •Michael D.Mangold,CPA CERTIFIED PUBLIC ACCOUNTANTS •Shelly K.Jackley,CPA •David S.Myers,CPA A Division of LSL,GPAs viLmure,peeLer 8_Voucher December 12, 2013 To the Honorable Mayor and Members of the City Council City of Seal Beach, California We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Seal Beach (the City) for the year ended June 30, 2013. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and, Government Auditing Standards and OMB Circular A-133, 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 July 1, 2013. 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 of Seal Beach are described in the notes to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year ended June 30, 2013. We noted no transactions entered into by the City of Seal Beach 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. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Lance, Sall&Lunghard, LLP 203 North Brea Boulevard Suite 203 Brea, CA 92821 TEL 714.672.0022 Fax 714.672.0331 www.lslcpas.com Orange County Temecula Valley Silicon Valley Los Angeles County LSL 0 C[NTIII[B PUBLIC ACCOUNTANTS A. viurwc.of c,r fl lxa;r!,cr To the Honorable Mayor and Members of the City Council City of Seal Beach, California Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. These differences are described below. In addition, none of the misstatements detected as a result of audit procedures by management were material, either individually or in the aggregate, to the financial statements taken as a whole. Current Year Over (Under) Revenues and Expenditures/Expenses and Changes in Fund Unadjusted Audit Differences Balance/Equity Accrued Interest-Business Type $ 15,037 CJPIA Cumulative Refund Due to the City (81,018) Cumulative effect (before effect of prior year differences) (65,981) Effect of unadjusted audit difference-prior year - Cumulative effect (after effect of prior year differences) $ (65,981) 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 December 12, 2013. 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. LSL 0 C[NTIII[B PUBLIC ACCOUNTANTS A. viurwc.of c,r fl lxa;r!,cr To the Honorable Mayor and Members of the City Council City of Seal Beach, California Other Matters 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. The following new Governmental Accounting Standards Board (GASB) pronouncements were effective for fiscal year 2012-2013 audit: GASB Statement No. 61, The Financial Reporting Entity: Omnibus-an amendment of GASB Statement 14 and 34. The City of Seal Beach properly implemented this pronouncement. GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The City of Seal Beach properly implemented this pronouncement. GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. The City of Seal Beach properly implemented this pronouncement. The City elected to early implement GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. The following Governmental Accounting Standards Board (GASB) pronouncements are effective in your next fiscal year 2013-2014 audit and should be reviewed for proper implementation by management: GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees This information is intended solely for the use of the members of the City Council or individual(s) charged with governance and management of the City and is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours, Brea, California 006 Attachment B •David E.Hale,CPA,CFP •Bryan S.Gruber,CPA 0 0 Donald G.Slater,CPA •Deborah A.Harper,CPA LSL •Richard K.Kikuchi,CPA •Gary A.Cates,CPA •Susan F.Matz,CPA •Michael D.Mangold,CPA CERTIFIED PUBLIC ACCOUNTANTS •Shelly K.Jackley,CPA •David S.Myers,CPA A DIvlslon of LSL,CPAs VILMure,peeLer&Voucher INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor and Members of the City Council City of Seal Beach, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Seal Beach, California, (the City) as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the City of Seal Beach's basic financial statements, and have issued our report thereon dated December 12, 2013. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of Seal Beach'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 of Seal Beach's internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Seal Beach'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 of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Seal Beach'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 Lance,Soil&Lunghard,LLP 203 North Brea Boulevard ^ Suite 203 Brea,CA 92821 ° TEL 714.672.0022 P Fax 714.672.0331 www.lslcpas.com Orange County Temecula Valley Silicon Valley Los Angeles County LSL To the Honorable Mayor and Members of the City Council City ofSeal Beach. California opinion. The nmsuhe of our tests disclosed no instances of noncompliance or other matters that are required tobe reported under Government Auditing Standards. Purpose mfthis 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 on integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. AccordinQ|y,this communication is not suitable for any other purpose. 04, '104f Brea, California December 12.2013 Attachment C Comprehensive Annual Financial Report Fiscal Year ending June 30, 2013 (Copies for review are available at City Hall in the City Clerk and Finance Departments)