Consideration of Audited Financial Reports: Year ending June 30, 2014.

City Charter (Article VI, Section 5) requires that the City perform and annual financial audit each year.  Furthermore, there is a Federal requirement to complete a Single Audit report if an organization received more than $300,000 in federal financial assistance, which the City has.  This Staff Summary is for formal adoption of these reports.

There is no financial impact to approving the City's Fiscal Year 2014 Comprehensive Annual Financial Report (CAFR) or the Single Audit.

Financial Reporting does not fit in a specific Council or Regional Plan goal, but allows for overall support of the organization.  This item is required by City Code. 

No

• Approve the City's Fiscal Year 2014 CAFR and Single Audit Report.
• Do not approve the City's Fiscal Year 2014 CAFR and Single Audit report with direction to the Audit Committee or independent auditor of Council's questions/issues.

 

 

The City is required to perform an independent  annual financial audit per City Charter Article VI, Section 5 which states: 

"Prior to the end of each fiscal year, the Council shall designate an independent Certified Public Accountant, who, as of the end of the fiscal year, shall make up an audit of accounts and other evidence of financial transactions of the City government, and shall submit a long-form report, including recommendations concerning policy and fiscal procedures, to the Council, and to the City Manager. Such accountant shall have no personal interest, direct or indirect, in the fiscal affairs of the City government or of any of its officers. The accountant shall, within specifications approved by the Council, post-audit the books and documents kept by the City, and any separate or subordinate accounts kept by any other office, department, or agency of the City government."

In addition to financial audit, the City is Federally required to complete a Single Audit based on Federal standards.  The City meets this requirement because it received more than $300,000 in federal assistance.

The City has hired Eide Bailly, LLC (the Auditors) to perform the audit on behalf of the City.  While the Auditors' staff works directly with the Finance Staff to complete review of the City's financial data and internal controls, their responsibility is to perform the audit with independence and report back to Council.  The financial reports are the responsibility of the City and are presented based on activity as of the end of the fiscal year and consists of the Comprehensive Annual Financial Report (CAFR) and Single Audit.  The CAFR is presented in accordance with all standards as defined by the Government Accounting Standards Board (GASB).  The Auditors are not responsible for reviewing every transaction for the fiscal year, however based on the standards the Auditors plan and perform the audit to obtain reasonable assurance that the statements are free of material misstatements. 

The City has established an Audit Committee to review the financial reports and findings.  The committee discusses the information and makes a recommendation to Councils to accept or reject the financial reports.  The Audit Committee is represented by a City Councilmember, three citizens, the City Manager, and the Management Services Director:

• Eva Putzova, Council Member
• David Cosper, CPA
• Sharman Cawood, CPA
• Christopher Lambert, CPA
• Jeff Meilbeck, City Manager
• Barbara Goodrich, Management Services Director

The financial reports were reviewed by the Audit Committee through a presentation by the Auditors.  The presentation of the financial reports to the Audit Committee occurred on January 29, 2015 and was facilitated by Rick Tadder, Finance Director, Lealan Miller, Partner with Eide Bailly, and Sarah Jones, Audit Manager with Eide Bailly. 

The City has received an unqualified opinion from the audit firm, meaning they believe the financial statements are fairly presented in accordance with generally accepted accounting principles.  In the Communication to Mayor and City Council (attached) the audit firm states: there were no difficulties encountered in performing the audit and; there were no disagreements with management.  The letter states there were no corrected misstatements and four uncorrected misstatements.  Misstatements are noted when the Auditors have found items that may be incorrectly presented during the audit engagement.  

The first two uncorrected misstatements are related to the prior year reconciliation of the Miscellaneous Billing system to our General Ledger and have been corrected.  The third item is related to an Airport capital asset that should have been recognized in the prior fiscal year.  The fourth item is related to accruing interest payable at June 30th for a debt service payment in September.  These items are not deemed material to the City CAFR. 

In the Single Audit Report no findings noted.  The two Federal Award findings from Fiscal Year 2013 have been corrected.   

Due to prior year findings, the City's Single Audit status does not qualify as a low risk auditee.  As a result, this year's single audit covered at a minimum of fifty percent of the federal expenditures and will cover the same level for Fiscal Year 2015. We do not expect to have any negative impact to our ability to submit for federal grants based on the finding. 

The Audit Committee unanimously approved the acceptance of the CAFR and Single Audit.

An annual audit is statutorily required by ARS 9-481.  In addition, should the City not perform an annual audit of it financial statements and complete a Single Audit, the City could lose valuable grant funding.  The amount of reimbursements of Federal Award reported for in Fiscal Year 2014 was $9.3 million.  State and local grant funding was $7.3 million in Fiscal Year 2014.

Independent review of the City’s financial statements elevates the level of confidence that the City is reporting fairly, accurately, and within prescribed guidelines.

Involve:  The community is directly involved through the participation on the Audit Committee. 

Inform:  Any community member may review the most recent CAFR and Single Audit Report.  A copy of the current and historical copies CAFR and Single Audit and SEFA is available in the following locations:

• On the City web site, www.flagstaff.az.gov under the Finance and Budget section (http://www.flagstaff.az.gov/index.aspx?nid=164)
• At the Flagstaff Public Library, 300 W Aspen Ave, Flagstaff, Arizona
• At the East Flagstaff Community Library, 3000 N 4^th Street, Suite 5, Flagstaff, Arizona
• Contact the Finance Director at (928) 213-2215

Due to file size of these documents, one copy of the CAFR and Single Audit is available in the Council office.