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HomeMy WebLinkAboutItem 3D: Adoption of Comprehensive Annual Financial Report ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Adoption of Resolution 4856 Acknowledging Receipt of the City of Eugene, Oregon Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2005 Meeting Date: January 9, 2006 Agenda Item Number: 3D Department: Central Services Staff Contact: Fionan Cronin www.eugene-or.gov Contact Telephone Number: 682-5394 ISSUE STATEMENT This is a resolution acknowledging receipt of the Comprehensive Annual Financial Report (CAFR) for the City of Eugene for the fiscal year ended June 30, 2005. This resolution demonstrates compliance with ORS 297.465(2), which requires that a copy of the City’s CAFR, containing a signed expression of opinion, be furnished to each member of the governing body. BACKGROUND Under Oregon Municipal Audit Law, the City is required each fiscal year to contract with an authorized accounting firm for the audit of its accounts and fiscal affairs (ORS 297.425). The regional firm of Grove, Mueller & Swank, P.C. (auditors) has completed the audit of the City of Eugene's financial statements for the fiscal year ended June 30, 2005, and issued an unqualified opinion on the basic financial statements. The auditors conduct the audit of the City's basic financial statements in accordance with generally accepted auditing standards and the Minimum Standards for Audits of Oregon Municipal Corporations. In addition, as a recipient of federal grants, the City is subject to the Federal Single Audit Act of 1984, which requires that the audit be conducted in accordance with Government Auditing Standards, issued by the Comptroller General of the United States and Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments and Non-Profit Organizations. These standards and OMB Circular A-133 require that the auditors plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement and whether the City complied with the laws and regulations pertaining to federally-funded programs. In addition to state and federal requirements, the City has bond covenants in connection with certain debt issuances which require that the City issue annual audited financial statements. Management is responsible for the information contained in, and the preparation of, the City's financial statements. To effectively fulfill this responsibility and to contain the cost of auditor services, City staff devotes significant effort to the closing of accounting records, the preparation of schedules and audit workpapers, and the production of the CAFR. This also results in staff expertise being developed on specific financial and service issues that can then be used to assist departments and other pertinent parties. L:\CMO\2006 Council Agendas\M060109\S0601093D.doc The key pages of the CAFR which the council may wish to review are pages 11-12 and pages 147-148, where two of the auditors' reports are found. In the first report, the auditors have issued a “clean opinion” on the City’s basic financial statements, indicating that the City has prepared these statements in conformity with generally accepted accounting principles (GAAP). GAAP for state and local governments is promulgated by the Governmental Accounting Standards Board (GASB) to ensure consistency in accounting and comparability in financial reporting among state and local governments. A clean opinion is a fundamental financial goal for every government, as it represents the highest level of opinion a government can receive from its independent auditors. A clean opinion is an important indicator of sound financial management and creditworthiness to the citizens, other governmental jurisdictions (state and federal), credit rating agencies, investment bankers, bond holders, and other private sector entities. In the second report, the auditors state that nothing came to their attention that caused them to believe that the City was not in compliance with appropriate state and federal regulations, with one exception where the City exceeded its legal budget (page 47). The Facilities and Fleet Internal Service Fund exceeded the Central Services operating budget of approximately $6.1 million by $9,002. Although Facility staff closely monitoredtheir expected expenditures to appropriation amounts particularly toward the end of the fiscal year, some fiscal year 2006 invoices for fiscal year 2005 obligations incurred by the City, were expensed back to fiscal year 2005, and caused the over-expenditure. The overage is less than one-tenth of a percent; however, ORS require that all over-expenditures be brought to the attention of the governing body. Two additional reports, beginning on page 151, specifically address compliance with Federal laws, regulations, contracts and grants, and indicate that the auditors found no material instances of the City's noncompliance with these requirements, nor were there any findings or questioned costs noted in relation to Federal awards made to the City. For fiscal year 2005 audits, the auditors have submitted a memo to the governing body for each of their clients that addresses any concerns or findings they encountered in such audit-related areas as fraud, accounting estimates and policies. Their memo addressing these issues is attached and it states that there were no concerns that required communication to you. RELATED POLICY ISSUES Policy B.1 of the City’s Financial Management Goals and Policies states that “The City will maintain an accounting and financial reporting system that allows reporting in conformance with Generally Accepted Accounting Principles and Oregon Local Budget Law and will issue a Comprehensive Annual Financial Report each fiscal year.” This action signifies formal completion of this process for the fiscal year ended June 30, 2005, and demonstrates Council’s compliance with the Policy. COUNCIL OPTIONS Not applicable. L:\CMO\2006 Council Agendas\M060109\S0601093D.doc CITY MANAGER’S RECOMMENDATION The City Manager recommends adoption of the proposed resolution. SUGGESTED MOTION Move to adopt Resolution 4856 acknowledging receipt of the Comprehensive Annual Financial Report (CAFR) for the City of Eugene for the fiscal year ended June 30, 2005. ATTACHMENTS A. Resolution B. Copy of the 2005 Comprehensive Annual Financial Report C. Copy of the Grove, Mueller & Swank, P.C. memo FOR MORE INFORMATION Staff Contact: Fionan Cronin Telephone: 682-5394 Staff E-Mail: finn.j.cronin@ci.eugene.or.us L:\CMO\2006 Council Agendas\M060109\S0601093D.doc ATTACHMENT A RESOLUTION NO. A RESOLUTION ACKNOWLEDGING THE RECEIPT OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF EUGENE FOR THE FISCAL YEAR ENDED JUNE 30, 2005 The City Council of the City of Eugene finds that: The firm of Grove, Mueller & Swank, P.C. has completed the audit of the financial statements of the City of Eugene for the fiscal year ended June 30, 2005, as required by ORS 297.425 and, pursuant to ORS 297.465, reported to the Mayor and City Council on its findings. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Eugene, a Municipal Corporation of the State of Oregon, as follows: Section 1. That the Council hereby acknowledges that it has received the Comprehensive Annual Financial Report for the fiscal year ended June 30, 2005. The foregoing resolution adopted the 9th day of January, 2006. City Recorder ATTACHMENT B A copy of the Comprehensive Annual Financial Report for Fiscal Year ending June 30, 2005, is scheduled to be available online after January 16, 2006. For more information, contact Council Coordinator Lynda Rose at 682-5017. <llIIII1111I\\1\1111111 ATTACHMENT C GROVE, MUELLER & SWANK, P,C, CERTiFIED PUBLIC i\CCOllNTA."<T5 AND CONSUUANTS 475 Cottage Strut NE, Suite )(;0 $ Salem, Oregon 97301 (S03) 581-7788 November 21, 2005 To the HDnorable Mayor, Members of the City Council and the City !vlanager City of Eugene, Oregon This letter is intended to inform the City Council, City Manager and management of the City of Eugene, Oregon about significant matters related to the conduct of the annual audit Our purpose is to assist you in appropriately discharging your oversight responsibilIty, and to comply with our professional responsibilities. The foHo'Ning summarizes various matters which must be communicated to you lJ...'1der auditi11g standards generany accepted in the United States of Amelica.( The Auditor's Responsibilitv Under Audiling Standards Generallv ACCel)ted in the United States of America Our audit of the fmancial statements of the City of Eugene for the year ended June 30, 2005 was conducted in accordance with auditing standards generally accepted in the lJnited States of America, Govemment Auditing Standards issued by the Comptroller General of the United States, the provisions of the Single Audit Act, o.r:v.m Circular A-133 and OMH's Compliance Supplement and the Minimum Standards for Audit of Oregon Municipal Corporations. Those standards, circulars and supplement require that \lie plan and perform the audit to obtain rea.sonable assurance about \vhether the financial statements are free of material misstatement, whether caused by error, fraudulent financial reporting or misappropriation of assets. An audit includes examining, on a test basis, evidence sUPPoliing the amounts and disclosures in the financial statements. .An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Accordingly, the audit was designed to obta.in reasonable, r'ather than absolute, assurance about the financial statements. We believe that our audit accomplished that objective. In accordanc(~ with Government Auditing Standards, we have also performed tests of internal controls over .financial repmiing and tests of compliance with certain provisions of laws, regulations, contracts and gmnt agreements that contribute to the evidence supporting our opinion on the fmandai statements. However, 6e:y do not provide a basis for an opinion on the Cit)"s internal control. The Single Audit Act does require that we express an opinion on compliance requirements for selected Federal programs. We are also required under auditing standards generally accepted in the United States of America (Statement on Auditing Standards No. 99, Consideration of Fraud in a Financial Statement Audit) to communicate directly with management concerning fraud, The required communication was included as part of our arrangement letter. It is the responsibility of management of the City of Eugene to infonn us of their concems about the risks of fraud within the City, and any knowledge of thud or suspected :fraud affecting the City. It is our responsibility to communicate to you matters related to the conduct of the audit including 1) fraud involving senior management and fraud (whether caused by senior management or other employees) that causes a material misstatement of' the financial statements, 2) illegal acts that come to our attention (unless they are clearly inconsequential), 3) disagreements with management and other serious difficulties encountered in performing the audit, and 4) various matters related to the entity's accounting policies and financial statements. Vie noted no instances that reqUlre cOInmunication to you. Mamlllemcnt <hIQg~!lmts, Accountin~ .lDstimates and Adjustments Accounting estimates are an integral part of the preparation of financial statements and are based upon management's current judg-ment. The process used by management encompasses their knowledge and experience about past and CUTrent events and certain assumptions about future events. Management has infomled us they used ail the relevant facts available to them at the time to make the best judgments about accounting estimates and we considered this information in the scope of our audit. Estimates significant to the financial statements include such items as the allowance for doubtful accounts and depreciation. There were no adjustment idf.;ntified or recorded as part ofthe audit process. \V(: accumulated no uncorrected misstaternents during our audit Accounting Policies ~md Alternative Treatments .tvfanagement, under the direction of the City Council has the ultimate responsibility for ihe appropriateness of the accounting policies used by the City. Management has represented to us that the C1ty did not adopt any significant new accounting policies nor have there been any changes in existing significant accounting policies during the current year which should be brought to your attention. We are not a\vare of any consultations management had with other accountants about accounting or auditing matters. Discussions ",'ftb l\'Ian2.j,tement In the process of performing our audit procedures we often (~ncounter situations where we make recoUh'1lendations to management concerning accounting processes, methods of recording transactions and strengthening controls. We believe these reconunendations assist the City in the aCCOul1ting and financial reporting process, but a:re not of such a magnitude to warrant discussion with the City Council. If we encounter matters of such significance that in our opinion they should be brought to the attention of the City Council we \,till issue a leti:er commonly know as a management letter. We did not issue such a letter in the Clh'Tent year. ';^le encountered no disagreements with management over the application of significant accounting principles, the basis f{)r management's judgments on any significant matters, the scope of the audit or significant disclosures to be included in the tlnanciilstatements. "Ve did not encou:nter any difficulties in dealing vlith management relating to the performance of the audit. No major issues were discm:sed with management prior to our retention to perfonn the aforementioned audit. Closing \Ve will be pleased to respond to any questions you have about the foregoing. \Ve appreciate the opportunity to conti,'lue to be of service to the Cit'j of Eugene. This n,-port is intended solely for the inflynnation and use of the City Council and management and of the City of Eugene is not intended to be and should not be used by anyone oilier than these specified parties. V:h~lf1:!trS, 12