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HomeMy WebLinkAboutSR - - PART 1 AUDITED FINANCIAL STATEMENTS & RELATED FINANCIAL REPORTS YEAR ENDED JUNE 30 20135. AUTHORIZATION /GUIDELINES: The City has the authority to issue financial statements as a responsible business practice. The Financial Statements are prepared in conformance with governmental accounting standards. 6. DISCUSSION and BACKGROUND: The following Reports, Letter and Statements for the fiscal year ended June 30, 2013 are presented: 1. Comprehensive Annual Financial Report (CAFR) — This report is divided into three major sections: the Introductory Section, the Financial Section and the Statistical Section. The Introductory Section includes a Letter of Transmittal. The Financial Section comprises the Audit Opinion, Management's Discussion and Analysis, and the Basic Financial Statements. The Statistical Section provides important historical and trend information about the City. The Audit opinion is an "unqualified opinion ", which states that, in the auditor's opinion, the basic financial statements of the City are presented fairly in all material respects and are in conformity with generally accepted accounting principles. 2. Audit Communication Letter— a report of recommendations made to management by the auditors to improve internal controls and /or operating efficiencies within the city. 3. Independent Accountants' Report on Agreed -Upon Procedures Applied to the Appropriations Limit Vorksheets — procedures performed solely to assist the City in meeting the requirements of Section 1.5 of the Article XIIIB of the California Constitution. 4. Independent Accountants' Report on Agreed- Upon Procedures Applied to the Investment Portfolio — independent review of investment operations and compliance with the City's investment policy. 5. Air Pollution Reduction Fund Financial Statements and Independent Auditors' Report - audited financial statements in accordance with Generally Accepted Auditing Standards and the standards applicable to the financial audits contained in Government Auditing Standards. ITEM 01/14/14 /%Printed on Recycled Paper 6. Independent Auditors' Report on Internal Control Over Financial Reporting — a report to describe the scope of testing of the City's internal control over financial reporting and the results of that testing. The auditors detailed two deficiencies in internal control which they considered to be material weaknesses. 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. During test work, the auditors noted the Deposits Payable account relating to asset seizures, and developer permits and deposits had not been properly reconciled for an extended period of time. They noted there is uncertainty whether these are actual deposits or if they should be recognized as revenue of the City. The auditors recommend management properly reconcile the deposits payable accounts each year, and determine whether these amounts need to be written off or recognized as revenue. Staff continues to research and closely monitor this account balance. We anticipate the account will be fully reconciled by the end of the fiscal year ending June 30, 2014. b. Restatements to Net Position were caused by corrections of prior year capitalization of governmental assets, to record deferred promissory notes issued in prior years but not recorded, and to correct the duplicate posting of an invoice in the prior year. Restatements to Fund Balance were caused by corrections to the classification of unavailable revenue in the prior year which should have been posted as revenue, and to correct the duplicate posting on an invoice in the prior year. The Restatements to both Net Position of $1,863,154 and to Fund Balance of $141,590 were due to non - recurring financial transactions and staffs interpretations of transactions at the time of occurrence. Staff considers these adjustments minor in relation to Total Net Position of $876,738,113. Controls have been strengthened to identify issues and properly classify the accounts on a go- forward basis. ITEM 01/14/14 C oPrinted on Recycled Paper 7. Single Audit Report on Federal Awards — audit of compliance requirements as described in the U.S. Office of Management and Budget (OMB) circular A -133 Compliance Supplement. In their Single Audit Report Schedule of Findings and questioned Costs for the Fiscal Year Ended June 30, 2013, the auditors include their Report on Internal Control over Financial Reporting (detailed as Finding 2013 -001 and 2013 -002 and discussed in Item #6 a & b above). In addition, the auditors include Finding 2013 -003: The City has failed to submit timely quarterly SF -425 Reports in three out of four quarters. While staffing shortages delayed the filing of the SF -425 reports, they were eventually filed with the appropriate federal filing agency. Staff is currently unaware of any filing "penalty" for the late filing of these reports. Additionally the City was unaware of this requirement until last year's audit brought this issue to light. Therefore, the reports were filed once staff was made aware of the requirement and when staff had sufficient time to file a thorough and accurate report. Going forward, staff has implemented procedures that will be used to notify the reporting department of the deadlines for these reports. 7. ATTACHMENTS 1. City of Orange Comprehensive Annual Financial Report and Summary of Audit Results 2. Audit Communication Letter 3. Independent Accountants' Report on Agreed -Upon Procedures Applied to the Appropriations Limit Worksheets 4. Independent Accountants' Report on Agreed -Upon Procedures Applied to Investment Portfolio 5. Air Pollution Reduction Fund Financial Statements and Independent Auditors' Report 6. Independent Auditors' Report on Internal Control Over Financial Reporting 7. Single Audit Report on Federal Awards ITEM 01/14/14 C oPrinted on Recycled Paper