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TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: DIRECTOR OF FINANCE AND INFORMATION TECHNOLOGY
DATE: DECEMBER 16, 2003
SUBJECT: FY02-03 COMPREHENSIVE ANNUAL FINANCIAL REPORT, AUDIT MANAGEMENT LETTER AND INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE AND INTERNAL CONTROL
Staff Coordinators: Kathryn Downs, Accounting Manager
Gary Gyves, Senior Administrative Analyst
Receive and file the following: (1) the FY02-03 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 (CAFR)
Each City Council Member has received a copy of the FY02-03 CAFR for the City of Rancho Palos Verdes. 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) is expected to be presented to their respective governing boards on January 20, 2004. A copy of the CAFR is currently available for review by the public in the reception area at City Hall.
Finance staff has prepared the CAFR, and the City’s auditors, Vavrinek, Trine, Day & Co., LLP, have reviewed the document in its entirety. Staff believes that the FY02-03 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, 2003. 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 FY02-03, 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 $233,616 on Federal funded projects during FY02-03; therefore, a Single Audit was not required.
General Fund Reserves
In conjunction with the adoption of the FY03-04 budget on June 3, 2003, staff estimated that the ending General fund reserves would be $8,191,171 as of June 30, 2003. Upon the conclusion of the fiscal year ended June 30, 2003, the actual balance of General fund reserves was $9,606,644. Staff has prepared a comparison of estimated vs. actual General fund reserves as of June 30, 2003.
A comparison of actual vs. budgeted revenue and expenditures in the General fund for FY 02-03 is provided below.