08-08-2022 Council Packet - Laserfiche WebLink

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2021-001 Material Audit Adjustments Condition: During our audit, material adjustments were needed to correct the year-end balances for an interfund loan not on the City’s books and the 2021A G.O bond not being recorded on the books. Criteria: Such adjustments were needed to correct year end balances. Amounts reported in the City’s accounting system need to agree to the underlying supporting documentation. Cause: City staff did not record an interfund loan which took place in a prior year. City staff had not previously recorded the 2021A bond issuance that took place on December 30, 2021 Effect: This indicates that misstatements may occur and not be detected by the City’s system of internal control, which could lead to a material misstatement. Recommendation: We recommend management review the related journal entries, obtain an understanding of why the entries were necessary and modify current procedure to ensure that future corrections are not needed. Management Response: Management agrees with the finding and understands the reason the adjustments were needed. Procedures over year- end adjustments will be reevaluated to eliminate the need for related audit adjustments in the future. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City'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 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 opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 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 are described in Note 1 to the financial statements. The City did not change accounting policies during the year. We noted no transactions entered into by the City 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 most sensitive estimates affecting the financial statements include depreciation on capital assets, allocation of payroll and compensated absences, the liability for other postemployment benefits, value of land held for resale, and the assets and liabilities for the City’s pensions. • Management’s estimate of depreciation is based on estimated useful lives of the assets. Depreciation is calculated using the straight-line method. • Allocations of gross wages and payroll benefits are approved by City Council within the City’s budget and are derived from each employee’s estimated time to be spent servicing the respective functions of the City. These allocations are also used in allocating accrued compensated absences payable. • Management’s estimate of its OPEB liability is based on several factors including, but not limited to, anticipated retirement age for active employees, life expectancy, turnover, and healthcare cost trend rate. DRAFT 3