agenda item no. 5.c. city of el cerrito presentation to
TRANSCRIPT
City of Barstow Presentation to Provide Professional Auditing
ServicesFebruary 16, 2021
Agenda Item No. 5.C.
City of El Cerrito
1
Agenda Engagement Team Deliverables and Scope of the Audit Areas of Primary Emphasis Auditors Report and Financial Statements Required Communications New Accounting Standards Conclusion & Discussion/Questions
2
Staff Wael Tantawy
Staff Jingyi Long
Deliverables and Scope of the Audit Report of Independent Auditors on City of El Cerrito Basic Financial Statements Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Report of Independent Auditors on City of El Cerrito Employees’ Pension Plan Basic Financial Statements Agreed-Upon Procedures Report on City of El Cerrito Master Installment Sale Agreement Compliance with Bond Covenants for the 2008 Sales Tax Revenue Bonds Agreed-Upon Procedures Report on Appropriation Limit Schedule Communications With Those Charged With Governance
Letter used to summarize communication of various significant matters to those charged with governance.
5
Areas of Primary Audit Emphasis Revenues & Receivables (Tax, Grants, Notes and Others): Improper revenue recognitions
Governmental Funds: Confirmed/validated property taxes, sales taxes, franchise taxes & other significant revenues/receivables.
Proprietary Funds: Performed analytical procedures and trends analysis.
Pension & OPEB: Complex accounting standards Reviewed management’s journal entries for pension and OPEB. Agreed amounts recorded to reports provided by CalPERS and CalPERS’ Auditors and performed testing of census information used by CalPERS. Tested the census information used by CalPERS Obtained reports from CalPERS auditors regarding plan assets and census data
6
Areas of Primary Audit Emphasis The risk of management override of controls is addressed by the following procedures:
Assignment of audit staff based on consideration of audit risk. Procedures to incorporate an element of unpredictability in the audit from period to period. Consideration of the selection and application of significant accounting principles. Examination of journal entries. Review of accounting estimates for bias. Evaluation of business rationale for unusual transactions. Evaluation of the appropriateness of fraud-related inquiries performed
Impact of the shelter in place and remote work on the control environment
7
8
Auditors Report Unmodified opinion Audit performed in accordance with Generally Accepted Auditing Standards, and Government Auditing Standards Financial statements are fairly presented in all material respects Emphasis of matter regarding going concern Significant accounting policies have been consistently applied Estimates are reasonable Disclosures are properly reflected in the financial statements
9
10
Receivable
ent
Deferred outflows of resources
$-
11
Deferred Inflows of Resources
2018 $1,366 $6,000 $2,230 $61,775 $2,846 $24,015 $1,076 2019 $1,232 $6,000 $2,567 $61,856 $2,995 $22,640 $2,923 2020 $1,554 $9,000 $3,679 $65,833 $3,906 $21,651 $2,954
$- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000
Liabilities and Deferred Inflows of Resources (in thousands)
12
Net Investment in Capital Assets Restricted Unrestricted
2018 60,049 17,042 (51,000) 2019 57,238 14,226 (54,936) 2020 56,115 15,241 (59,291)
(80,000) (60,000) (40,000) (20,000)
- 20,000 40,000 60,000 80,000
Net Position (in thousands)
Government-Wide Financial Statements
$-
15
Total Expenditures 36,252,189$ 40,202,753$ 39,686,283$
Unassigned Fund Balance as
Number of months 0 0 0
GFOA recommendation 2 - 4
Measure of City's ability to operate with no revenues using available net position.
Sheet1
2018
2019
2020
GFOA recommendation
2 - 4
Measure of City's ability to operate with no revenues using available net position.
City’s Annual Pension Contributions
17
$-
$-
Other Financial Information
$-
19
$- $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 $80,000,000 $90,000,000
$100,000,000
City’s Net Pension Liability Sensitivity to Discount Rate (2019 Measurement Date)
Other Financial Information City’s Annual OPEB Contributions
21
$95,000
$100,000
$105,000
$110,000
$115,000
$120,000
$125,000
$130,000
Plan Fiduciary Net Position Total OPEB Liability Net OPEB Liability
as of MD 6/30/17 $- $2,845,887 $2,845,887 as of MD 6/30/18 $- $2,994,539 $2,994,539 as of MD 6/30/19 $- $3,906,161 $3,906,161
$- $500,000
City’s OPEB Funded Status
Other Financial Information
$- $500,000
$1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000
City’s Net OPEB Liability Sensitivity to Discount Rate (2019 Measurement Date)
Other Financial Information
24
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
City’s Net OPEB Liability Sensitivity to Health Care Cost Trend Rate
(2019 Measurement Date)
Required Communications Our Responsibility Under U.S GAAS
• Opinion on whether financial statements are fairly stated in accordance with U.S GAAP
• Evaluate internal control over financial reporting including tone at the top
• Evaluate compliance with laws, contract and grants
• Ensure financial statements are clear and transparent
• Communicate with the governing body
26
financial statements • Establish and maintain internal
control over financial reporting • Making all financial records
available to us • Adjust the financial statements to
correct material misstatements • Establish internal control to prevent
and detect fraud • Inform us of all known and
suspected fraud • Comply with laws and regulations • Take corrective action on audit
findings
• It is our responsibility to maintain independence
• We will maintain our independence by strict adherence to the AICPA and the Board of Accountancy rules and regulations
• Other than compiling the financial statements, no other services performed that could affect our independence
• Audit was performed within the time frame communicated to the City in our engagement letters
27
Management Judgment and Accounting Estimates
The City adopted the following new pronouncements during the year: • GASB Statement No. 95,
Postponement of the Effective Dates of Certain Authoritative Guidance
• Useful lives of Capital Assets
• Pension Plan (actuarial assumptions
• OPEB Plan (actuarial assumptions
• Summary of Significant Accounting Policies
• Cash and Investments • Long Term Debt • Capital Assets • Net Position and Fund Balances • Pension Plans and Other Post
Employment Benefit (OPEB) Plans • Commitments and Contingencies • Redevelopment Agency Dissolution
and Successor Agency Activities • Going Concern
None
29
Required Communications Significant Audit Adjustments and Unadjusted Differences Considered by Management to be Immaterial
Potential Effect on the Financial Statements of Any Significant Risks and Exposures
Disagreement with Management
There were adjustments and reclassifying entries during the course of the audit. Management has posted all proposed audit adjustments.
No significant risks or exposures were identified. Legal matters and potential liabilities are disclosed in the financial statements
We are pleased to report that there were no disagreements with management
30
Representations Requested of Management
Material weaknesses: • Ability of the City to continue
as a going concern
We have requested certain representations from management that are included in the management representation letters.
We are not aware of any significant accounting or auditing matters for which management consulted with other accountants
31
Material Uncertainties Related to Events and Conditions
Fraud and Illegal Acts
Other than the engagement letter and management representation letter, there have been no other significant communications
Certain conditions raise substantial doubt about the City’s ability to continue as a going concern
We have not become aware of any instances of fraud or illegal acts
32
modifications) 2021
• Statement 87 – Leases • Statement 89 – Construction-period interest • Statement 92 – Omnibus (multiple effective date) • Statement 93 – LIBOR removal and lease modifications • Statement 97 – Certain component unit criteria, and accounting and
financial reporting for Internal Revenue Code Section 457 Deferred Compensation Plans
2022
• Statement 91 – Conduit debt • Statement 94 – Public-private partnerships • Statement 96 – Subscription-based information technology
arrangements 2023
34
Thank You For Allowing Us to Provide Audit Services to the City of El Cerrito
35
Slide Number 2
Areas of Primary Audit Emphasis
Areas of Primary Audit Emphasis
Slide Number 9
Agenda Item No. 5.C.
City of El Cerrito
1
Agenda Engagement Team Deliverables and Scope of the Audit Areas of Primary Emphasis Auditors Report and Financial Statements Required Communications New Accounting Standards Conclusion & Discussion/Questions
2
Staff Wael Tantawy
Staff Jingyi Long
Deliverables and Scope of the Audit Report of Independent Auditors on City of El Cerrito Basic Financial Statements Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Report of Independent Auditors on City of El Cerrito Employees’ Pension Plan Basic Financial Statements Agreed-Upon Procedures Report on City of El Cerrito Master Installment Sale Agreement Compliance with Bond Covenants for the 2008 Sales Tax Revenue Bonds Agreed-Upon Procedures Report on Appropriation Limit Schedule Communications With Those Charged With Governance
Letter used to summarize communication of various significant matters to those charged with governance.
5
Areas of Primary Audit Emphasis Revenues & Receivables (Tax, Grants, Notes and Others): Improper revenue recognitions
Governmental Funds: Confirmed/validated property taxes, sales taxes, franchise taxes & other significant revenues/receivables.
Proprietary Funds: Performed analytical procedures and trends analysis.
Pension & OPEB: Complex accounting standards Reviewed management’s journal entries for pension and OPEB. Agreed amounts recorded to reports provided by CalPERS and CalPERS’ Auditors and performed testing of census information used by CalPERS. Tested the census information used by CalPERS Obtained reports from CalPERS auditors regarding plan assets and census data
6
Areas of Primary Audit Emphasis The risk of management override of controls is addressed by the following procedures:
Assignment of audit staff based on consideration of audit risk. Procedures to incorporate an element of unpredictability in the audit from period to period. Consideration of the selection and application of significant accounting principles. Examination of journal entries. Review of accounting estimates for bias. Evaluation of business rationale for unusual transactions. Evaluation of the appropriateness of fraud-related inquiries performed
Impact of the shelter in place and remote work on the control environment
7
8
Auditors Report Unmodified opinion Audit performed in accordance with Generally Accepted Auditing Standards, and Government Auditing Standards Financial statements are fairly presented in all material respects Emphasis of matter regarding going concern Significant accounting policies have been consistently applied Estimates are reasonable Disclosures are properly reflected in the financial statements
9
10
Receivable
ent
Deferred outflows of resources
$-
11
Deferred Inflows of Resources
2018 $1,366 $6,000 $2,230 $61,775 $2,846 $24,015 $1,076 2019 $1,232 $6,000 $2,567 $61,856 $2,995 $22,640 $2,923 2020 $1,554 $9,000 $3,679 $65,833 $3,906 $21,651 $2,954
$- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000
Liabilities and Deferred Inflows of Resources (in thousands)
12
Net Investment in Capital Assets Restricted Unrestricted
2018 60,049 17,042 (51,000) 2019 57,238 14,226 (54,936) 2020 56,115 15,241 (59,291)
(80,000) (60,000) (40,000) (20,000)
- 20,000 40,000 60,000 80,000
Net Position (in thousands)
Government-Wide Financial Statements
$-
15
Total Expenditures 36,252,189$ 40,202,753$ 39,686,283$
Unassigned Fund Balance as
Number of months 0 0 0
GFOA recommendation 2 - 4
Measure of City's ability to operate with no revenues using available net position.
Sheet1
2018
2019
2020
GFOA recommendation
2 - 4
Measure of City's ability to operate with no revenues using available net position.
City’s Annual Pension Contributions
17
$-
$-
Other Financial Information
$-
19
$- $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 $80,000,000 $90,000,000
$100,000,000
City’s Net Pension Liability Sensitivity to Discount Rate (2019 Measurement Date)
Other Financial Information City’s Annual OPEB Contributions
21
$95,000
$100,000
$105,000
$110,000
$115,000
$120,000
$125,000
$130,000
Plan Fiduciary Net Position Total OPEB Liability Net OPEB Liability
as of MD 6/30/17 $- $2,845,887 $2,845,887 as of MD 6/30/18 $- $2,994,539 $2,994,539 as of MD 6/30/19 $- $3,906,161 $3,906,161
$- $500,000
City’s OPEB Funded Status
Other Financial Information
$- $500,000
$1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000
City’s Net OPEB Liability Sensitivity to Discount Rate (2019 Measurement Date)
Other Financial Information
24
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
City’s Net OPEB Liability Sensitivity to Health Care Cost Trend Rate
(2019 Measurement Date)
Required Communications Our Responsibility Under U.S GAAS
• Opinion on whether financial statements are fairly stated in accordance with U.S GAAP
• Evaluate internal control over financial reporting including tone at the top
• Evaluate compliance with laws, contract and grants
• Ensure financial statements are clear and transparent
• Communicate with the governing body
26
financial statements • Establish and maintain internal
control over financial reporting • Making all financial records
available to us • Adjust the financial statements to
correct material misstatements • Establish internal control to prevent
and detect fraud • Inform us of all known and
suspected fraud • Comply with laws and regulations • Take corrective action on audit
findings
• It is our responsibility to maintain independence
• We will maintain our independence by strict adherence to the AICPA and the Board of Accountancy rules and regulations
• Other than compiling the financial statements, no other services performed that could affect our independence
• Audit was performed within the time frame communicated to the City in our engagement letters
27
Management Judgment and Accounting Estimates
The City adopted the following new pronouncements during the year: • GASB Statement No. 95,
Postponement of the Effective Dates of Certain Authoritative Guidance
• Useful lives of Capital Assets
• Pension Plan (actuarial assumptions
• OPEB Plan (actuarial assumptions
• Summary of Significant Accounting Policies
• Cash and Investments • Long Term Debt • Capital Assets • Net Position and Fund Balances • Pension Plans and Other Post
Employment Benefit (OPEB) Plans • Commitments and Contingencies • Redevelopment Agency Dissolution
and Successor Agency Activities • Going Concern
None
29
Required Communications Significant Audit Adjustments and Unadjusted Differences Considered by Management to be Immaterial
Potential Effect on the Financial Statements of Any Significant Risks and Exposures
Disagreement with Management
There were adjustments and reclassifying entries during the course of the audit. Management has posted all proposed audit adjustments.
No significant risks or exposures were identified. Legal matters and potential liabilities are disclosed in the financial statements
We are pleased to report that there were no disagreements with management
30
Representations Requested of Management
Material weaknesses: • Ability of the City to continue
as a going concern
We have requested certain representations from management that are included in the management representation letters.
We are not aware of any significant accounting or auditing matters for which management consulted with other accountants
31
Material Uncertainties Related to Events and Conditions
Fraud and Illegal Acts
Other than the engagement letter and management representation letter, there have been no other significant communications
Certain conditions raise substantial doubt about the City’s ability to continue as a going concern
We have not become aware of any instances of fraud or illegal acts
32
modifications) 2021
• Statement 87 – Leases • Statement 89 – Construction-period interest • Statement 92 – Omnibus (multiple effective date) • Statement 93 – LIBOR removal and lease modifications • Statement 97 – Certain component unit criteria, and accounting and
financial reporting for Internal Revenue Code Section 457 Deferred Compensation Plans
2022
• Statement 91 – Conduit debt • Statement 94 – Public-private partnerships • Statement 96 – Subscription-based information technology
arrangements 2023
34
Thank You For Allowing Us to Provide Audit Services to the City of El Cerrito
35
Slide Number 2
Areas of Primary Audit Emphasis
Areas of Primary Audit Emphasis
Slide Number 9