|Back To Agenda||Print Page|
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: FINANCE DIRECTOR
DATE: JANUARY 7, 2003
SUBJECT: FY 2001-2002 COMPREHENSIVE ANNUAL FINANCIAL REPORT, AUDIT MANAGEMENT LETTER AND INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE AND INTERNAL CONTROL
Staff Coordinator: Kathryn Downs, Accounting Manager
Receive and file the following: (1) the FY 2001-2002 Comprehensive Annual Financial Report of the City of Rancho Palos Verdes, and (2) Independent Auditors’ Report on Compliance and on Internal Control over Financial Reporting.
BACKGROUND AND DISCUSSION
Comprehensive Annual Financial Report
The City implemented Governmental Accounting Standards Board (GASB) Statement No. 34 (GASB 34) with the June 30, 2002 Comprehensive Annual Financial Report (CAFR). Issued in June 1999, the statement titled "Basic Financial Statements – and Management Discussion and Analysis – for State and Local Governments" (the "New Reporting Model") established a new financial reporting format for state and local governments, and represents the largest single change in the history of governmental accounting and financial reporting. The City was required to implement GASB 34 with the June 30, 2003 financial statements.
With the development and release of GASB 34, some of the most popular features of traditional financial reporting found in annual reports of publicly traded companies have been incorporated into the New Reporting Model, including:
Prior to the adoption of the New Reporting Model, the financial statements of public agencies generally included land, buildings and equipment only. After adoption of the New Reporting Model, the City’s financial statements will include roadways, sewer systems, drainage systems and other infrastructure assets.
In other cities and governmental agencies, many of these infrastructure systems were constructed using debt financing, rather than cash reserves. After the adoption of the New Reporting Model, financial advisors and other interested parties will be able to compare the agency’s cost and depreciated value of sewers, storm drains and other infrastructure assets with the amount of debt used to finance their construction. In addition, the City Council, staff, financial advisors and the City’s residents will be able to analyze the amount of its investment and depreciated book value of the entire infrastructure of the City.
Each City Council Member has received a copy of the FY 2001-2002 CAFR for the City of Rancho Palos Verdes. The Finance Department staff has compiled the information contained within the CAFR, including a Letter of Transmittal or written summary of the City’s accomplishments during the past year, Management’s Discussion and Analysis, the financial statements and statistical information of the City and its component units (Redevelopment Agency and Joint Powers Improvement Authority). A separate set of financial statements for both of the City’s component units (inclusive of a separate audit opinion for each) will be presented to their respective governing boards. A copy of the CAFR is currently available for review by the public in the reception area at City Hall.
The City’s auditors, Vavrinek, Trine, Day & Co., LLP, have prepared the CAFR, and staff has reviewed the document in its entirety. Staff believes that the FY 2001-2002 CAFR meets the standards and requirements established by the Governmental Accounting Standards Board (GASB) for presentation of financial data, note disclosure and statistical information. The CAFR includes the audited financial statements and accompanying notes for the fiscal year ended June 30, 2002. The scope of the audit examination is limited to Management’s Discussion & Analysis, the financial statements and the accompanying notes, beginning on page 3 of the CAFR. Based upon their independent audit, Vavrinek, Trine, Day & Co., LLP have issued an unqualified opinion (clean opinion). The opinion letter is presented on page 1 of the CAFR.
A management letter is intended to call attention to matters involving the internal controls of the City’s accounting system. The auditors provide suggestions for improving the internal controls and efficiency of the of the City’s financial systems. Test procedures include discussions with staff about the internal control system and the general operating affairs of the City for the past fiscal year, tests of the internal control system, and other audit procedures deemed necessary to render an opinion on the City’s financial statements. For FY 2001-2002, the auditors noted no matters involving the City’s accounting internal controls, and therefore did not issue a management letter.
Independent Auditors’ Report on Compliance and on Internal Control over Financial Reporting
The auditors expressed an opinion that the results of their tests disclosed no instances of noncompliance with certain provisions of laws, regulations, contracts and grants; and the auditors noted no matters involving the internal control over financial reporting and its operation that they consider to be material weaknesses.
A Single Audit of Federal financial assistance is required when local governments spend more than $300,000 for projects funded with Federal monies. The City expended $186,988 on Federal funded projects during FY 2001-2002; therefore, a Single Audit was not required.