Consideration of Audited Financial Reports: Year ending June 30, 2013.

1. The City is required by City Charter (Article VI, Section 5) to have an annual audit performed for each fiscal year.
2. The City is also required to complete the Single Audit Report as the City receives more than $300,000 in federal financial assistance.

 

There is no financial impact to approving the City's Fiscal Year 2013 Comprehensive Annual Financial Report (CAFR) or the Single Audit.

Effective governance

No

• Approve the City's Fiscal Year 2013 CAFR and Single Audit Report.
• Do not approve the City's Fiscal Year 2013 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:

• Celia Barotz, Council Member
• David Cosper, CPA
• Sharman Cawood, CPA
• Christopher Lambert, CPA
• Kevin Burke, 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 March 27, 2014 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 three corrected misstatements and two uncorrected misstatements.  Misstatements are noted when the Auditors have found items that may be incorrectly presented during the audit engagement.  

The corrected misstatements are related to: 1) recognition of water revenue on an account that was adjusted by the City in July, 2) the recognition of utility capacity fee revenues, and 3) posting of a capital asset that should have been classified as construction in progress. The uncorrected misstatements are related to our reconciliation of the Miscellaneous Billing system to our General Ledger. The City will continue to research the discrepancies in the two systems and will correct when the issue is identified.  In addition, these items are not deemed material to the City CAFR. 

In the Single Audit Report, pages 15-18, there are four findings noted.  Two of the findings are related to the Financial Reports and two findings are related to Federal Awards.  Findings 2013-A and 2013-B are related to the financial report misstatements mentioned above.  Finding 2013-1 is related to the need for a Declaration of Trust to be filed against all public housing properties owned by Public Housing Authorities.  Finding 2013-2 is related to the timely reporting of the HUD Section 3 report. 

Due to these findings, the City's Single Audit status will no longer qualify as a low risk auditee.  As a result, next year's single audit must cover at a minimum of fifty percent of the federal expenditures during the following audit for two years. 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 2013 was $9.0 million.  State and local grant funding was $4.0 million in Fiscal Year 2013.

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.

2/19/2013 - EAB - postponed to March 5, 2013, meeting.