HomeMy WebLinkAbout13-ATTACHMENT BATTACHMENT B MANAGEMENT LETTER To the Honorable Mayor and Members of the City Council of the City of Tustin Tustin, California We have audited the financial statements of the governmental activities, business -type activities, each major fund, and aggregate remaining fund information of the City of Tustin (the City) for the year ended June 30, 2013. 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 on June 17, 2013 and in our letter to you dated June 19, 2013. 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 are described in Note 1 to the financial statements. As discussed in Note Id to the financial statements, the City incorporated deferred outflows of resources and deferred inflows of resources into the definitions of the required components of the residual measure of net position due to the adoption of Governmental Accounting Standards Board's Statement No. 63, "Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position ". The adoption of this standard also provides a new statement of net position format to report all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position. Also discussed in Note Id to the financial statements, the City has changed its method for accounting and reporting certain items previously reported as assets or liabilities during fiscal year 2012 -2013 due to the early adoption of Governmental Accounting Standards Board's Statement No. 65, "Items Previously Reported as Assets and Liabilities". Due to the early implementation of this statement, bond issue costs, which should be recognized as an expense in the period incurred, were eliminated. Accounting changes adopted to conform to the provisions of this statement should be applied retrospectively. The result of the implementation of this standard decreased the net position at July 1, 2012 of the business -type activity and Successor Agency to the Tustin Community Redevelopment Agency Private - Purpose Trust Fund by $434,527 and $1,255,379, respectively. No other accounting procedures were adopted and the application of other accounting policies was not changed during the year ended June 30, 2013. 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. -1- 2875 Michelle Drive, Suite 300, Irvine, CA 92606 • Tel: 714.978.1300 • Fax: 714.978.7893 Ojfices located in 0ran'oe and San Diego Coun ies Significant Audit Findings (Continued) Qualitative Aspects of Accounting Practices (Continued) 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. The most sensitive estimates affecting the City's financial statements are as follows: 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 which are based on actuarial valuations. e. The annual required contribution and actuarial accrued liability for the City's Other Post - Employment Benefit Plan is based on certain actuarial assumptions and methods prepared by an outside consultant. f. The claims liability for worker's compensation and general liabilities are based on estimates by the claims administrator. 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 statements were reported in Note 9 regarding the defined benefit pension plans, , Note 10 regarding other post - employment benefits, Note 11 regarding claims payable, and Note 16 regarding the recent changes in legislation affecting California Redevelopment Agencies. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. -2- Significant Audit Findings (Continued) Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. The following material misstatements, detected as a result of audit procedures, were corrected by management: a. Adjustment to cash with fiscal agent to remove cash paid to refunding bond agent. b. Adjustment to receivable from Successor Agency to apply payment received during the year. Disagreements with Management For purposes of this letter, a disagreement with management is 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 December 18, 2013. 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 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. -3- Other Matters 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. This information is intended solely for the use of the City Council and management of the City of Tustin and is not intended to be, and should not be, used by anyone other than these specified parties. Irvine, California December 18, 2013