HomeMy WebLinkAboutCity ACL Final 6-30-10 2-16-11DIEHL, EVANS & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
A PARTNERSHIP INCLUDING ACCOUNTANCY CORPORATIONS
5 CORPORATE PARK, SUITE 100
IRVINE, CALIFORNIA 92606 -5165
(949) 399 -0600 • FAX (949) 399 -0610
www.diehievans.com
The Honorable Mayor
and Members of the City Council
of the City of Lake Elsinore
Lake Elsinore, California
MICHAEL R LUDIN, CPA
CRAIG W. SPRAKER, CPA
NITIN P. PATEL, CPA
ROBERT J. CALLANAN, CPA
*PHII .IP H. HOLTKAMP, CPA
*THOMAS M. PERLOWSKI, CPA
*HARVEY 1. SCHROEDER, CPA
KENNETH R AMES, CPA
WILIdAM C. PENTZ, CPA
February 7, 2011 *A PROFESSIONAL CORPORATION
We have audited the financial statements of the governmental activities, each major fund, and the
aggregate remaining fund information of the City of Lake Elsinore for the year ended June 30, 2010.
Professional standards require that we provide you with information about our responsibilities under
generally accepted auditing standards, as well as certain information related to the planned scope and
timing of our audit. We have communicated such information in our engagement letter to you dated
April 7, 2010. Professional standards also require that we communicate to you the following
information related to our audit.
Significant Audit Findings:
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 of Lake Elsinore are described in Note 1 to the
financial statements. No new accounting policies were adopted and the application of existing policies
was not changed during the year ended June 30, 2010. We noted no transactions entered into by the
City of Lake Elsinore 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.
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OTHER OFFICES AT: 2965 ROOSEVELT STREET 613 W. VALLEY PARKWAY, SUITE 330
CARLSBAD, CALIFORNIA 92008 -2389 ESCONDIDO, CALIFORNIA 92025 -2598
(760) 729 -2343 • FAX (760) 729 -2234 (760) 741 -3141 • FAX (760) 741 -9890
Significant Audit Findings (Continued):
Qualitative Aspects of Accounting Practices (Continued)
The most sensitive estimates affecting the financial statements were:
a. Management's estimate of the fair market value of investments which is based on
market values provided by outside sources.
b. Management's estimate of the value of the capital assets (infrastructure) which is
based on industry standards.
c. The estimated useful lives of capital assets for depreciation purposes which are
based on industry standards.
d. The contribution made to the public defined benefit plan with Ca1PERS which is
based on an actuarial valuation.
e. The annual required contribution and actuarial accrued liability for the City's Other
Post - Employment Benefit Plan is based on an actuarial valuation.
We evaluated the key factors and assumptions used to develop these estimates in determining that they
were reasonable in relation to the financial statements taken as a whole.
The disclosures in the financial statements are neutral, consistent, and clear. Certain financial
disclosures are particularly sensitive because of their significance to the financial statement users. The
most sensitive disclosures affecting the financial statements are reported in Note 16 regarding the
defined benefit plan and Note 17 regarding other post - employment benefits.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing
our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during
the audit, other than those that are trivial, and communicate them to the appropriate level of
management.
The following matters of misstatements were detected by us as a result of our audit procedures, and
have been corrected by management.
a. The refunding of the 1995 Series A and 1999 Series C Bonds by the 2010 Series A
and Series B Bonds was not recorded properly. An adjustment was made to the
Redevelopment Agency general ledger to reflect the gross proceeds and repayment
of the bonds. As part of this adjustment, fund balances in the Redevelopment
Agency were restated to record advances between funds to record a loan that was
incorrectly written -off and to correct the application of debt service payments.
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Corrected and Uncorrected Misstatements (Continued)
b. An adjustment was made to correct Community Facilities District special
assessment revenue and record additional interfund loans.
The attached schedule summarizes uncorrected misstatements of the financial statements.
Management has determined that their effects are immaterial, both individually and in the aggregate, to
the financial statements taken as a whole.
Disagreements with Mana eg ment
For purposes of this letter, professional standards define a disagreement with management as a
financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that
could be significant to the financial statements or the auditors' report. We are pleased to report that no
such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management
representation letter dated February 7, 2011.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and
accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation
involves application of an accounting principle to the City of Lake Elsinore's financial statements or a
determination of the type of auditor's opinion that may be expressed on those statements, our
professional standards require the consulting accountant to check with us to determine that the
consultant has all the relevant facts. To our knowledge, there were no such consultations with other
accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and
auditing standards, with management each year prior to retention as the City of Lake Elsinore's
auditors. However, these discussions occurred in the normal course of our professional relationship
and our responses were not a condition to our retention.
This information is intended solely for the use of the City Council and management of the City of Lake
Elsinore and is not intended to be and should not be used by anyone other than these specified parties.
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City of Lake Elsinore
Schedule of Unrecorded Mistatements
June 30, 2010
DEBIT (CREDIT)
REF. DESCRIPTION ASSET LIABILITY FUND BAL REVENUE EXPENSE
GENERAL FUND
Interest income (17,083.00)
Interest receivable 17,083.00
To pass on adjustment for BNY interest receivable at year end
Interest income (362.10)
Interest receivable 362.10
To pass on adjustment for CFD interest receivable at year end
Payroll liabilities (6,624.55)
Group insurance expenditures 6,624.55
To pass on adjustment for group insurance payable at year end
Legal expenses 92,512.00
Accounts payable (92,512.00)
To pass on adjustment for attorney's unbilled fees.
RDA DEBT SERVICE FUND
Legal expenses
Accounts payable
To pass on adjustment for attorney's unbilled fees.
OTHER SPECIAL GOVT FUNDS
Measure A Revenue
Deferred revenue
To pass on recording deferred revenue
17,445.10 (99,136.55) 0.00 (17,445.10) 99,136.55
21,046.00
(21,046.00)
0.00 (21,046.00) 0.00 0.00 21,046.00
58,038.00
(58,038.00)
0.00 (58,038.00) 0.00 58,038.00 0.00
TOTAL UNRCORDED MISSTATEMENTS 17,445.10 (178,220.55) 0.00 40,592.90 120,182.55