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HomeMy WebLinkAboutCity Final ACL 3-21-12- 1 - To the Honorable Mayor and Members of the City Council of the City of Lake Elsinore Lake Elsinore, California 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, 2011. 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 dated April 7, 2011 and during our meeting on planning matters May 27, 2011. 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. The City implemented Governmental Accounting Standards Board Statement Number 54, “Fund Balance Reporting and Governmental Fund Type Definitions”, for the year ended June 30, 2011. No other accounting procedures were adopted and the application of other existing policies was not changed during the year ended June 30, 2011. 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. 2875 Michelle Drive, Suite 300, Irvine, CA 92606 • Tel: 714.978.1300 • Fax: 714.978.7893 Offices located in Orange and San Diego Counties - 2 - 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 is based on market values provided by outside sources. b. Management’s estimate of the value of capital assets (infrastructure assets) is based on industry standards. c. The estimated useful lives of capital assets for depreciation purposes are based on industry standards. d. The funded status and funding progress of the public defined benefit plan with CalPERS are based on actuarial valuations. e. The annual required contribution and actuarial accrued liability for the City’s Other Post-Employment Benefit Plan are based on certain actuarial assumptions and methods prepared by an outside consultant. 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. Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the financial statement were reported in Note 16 regarding the defined benefit pension plan, in Note 17 regarding the City’s other post-employment benefit plan and in Note 20 regarding the recent changes in legislation affecting California Redevelopment Agencies. 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 1999 Series A Bonds by the 2010 Series C Bonds was not recorded properly. An adjustment was made to the Redevelopment Agency’s general ledger to reflect the gross proceeds and repayment of the bonds. - 3 - Corrected and Uncorrected Misstatements (Continued) b. The issuance of the Tax Allocation Bonds 2011 Series A was not recorded properly. An adjustment was made to the Redevelopment Agency’s general ledger to reflect the gross proceeds. c. The issuance of the Local Agency Revenue Bonds 2010 Series A was not recorded properly. An adjustment was made to the Public Financing Authority’s general ledger to reflect the gross proceeds and discounts on investments. d. An adjustment was made to correct the unrealized gain on investments and cash balances. 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 Management 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 auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested and received certain representations from management that are included in the management representation letter dated March 12, 2012. 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’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 Information in Documents Containing Audited Financial Statements With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. - 4 - 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’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. Irvine, California March 12, 2012 City of Lake Elsinore Schedule of Unrecorded Mistatements DEBIT (CREDIT) REF.DESCRIPTIONASSETLIABILITYFUND BALREVENUEEXPENSE GENERAL FUND Interest income (52,514.73) Interest receivable52,514.73 52,514.730.000.00(52,514.73)0.00 RDA DEBT SERVICE FUND Interest income (38,078.24) Interest receivable38,078.24 38,078.240.000.00(38,078.24)0.00 TOTAL UNRECORDED MISSTATEMENTS 90,592.970.000.00(90,592.97)0.00 June 30, 2011 To pass on adjustment for City CAMP interest receivable at year end To pass on adjustment for City CAMP interest receivable at year end