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Home My WebLink AboutRPT 3 ANNL FIN'CL RPT 12-21-92REPORTS NO. 3 12-21-92 �„ .�._: Inter -Com �cSlv �/ ,ATE: DECEMBER 9, 1992 TO: HONORABLE MAYOR AND MEMBERS OF THE TIISTIN CITY COUNCIL FROM: CITY OF TIISTIN AUDIT COMMITTEE SUBJECT., PRESENTATION OF CITY'S COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR YEAR ENDING JUNE 30, 1992 RECOMMENDATION: Receive and file. BACKGROUND: The Audit Committee is forwarding the attached Comprehensive Annual Financial Report for year ending June 30, 1992. The Committee believes that City staff and the outside auditors, Diehl, Evans and Company, have produced this report in a thorough and professional manner. We base this opinion on the following: 1. We have reviewed and discussed the audit steps taken by the outside auditors. 2. We reviewed and discussed the responses by staff to the outside auditor's Internal Control Questionnaire. 3. We reviewed and discussed certain audit worksheets and corrections to the journals. 4. We reviewed and discussed the auditor's Management Letter. 5. We have had personal conversations with the outside auditors and staff about areas of our concerns. Based on the above, we believe that our City staff and outside auditors have produced a quality report that reflects their efforts as well as the financial condition of the City. We also believe that City money and property is reasonably protected by the accounting system of internal controls. We, therefore, recommend that the City Council accept and approve the report. . Page 2 December 9, 1992 We would like to praise the City staff competent and professional manner in which duties during this past year. Respectfully submitted by: Jerry Weil Chairman Tustin Audit Committee JW:ls Attachment a:cafr.rpt and auditors for the they performed their DIEHL,EvANs &COMPANY CERTIFIED PUBLIC ACCOUNTANTS •. ?,kMERSHIP INCLUDING ACCOUNTANCY CORPORATIONS 13401 VON KARMAN, SUITE 200 IRVINE • CALIFORNIA 92715-1542 PHONE (714) 757-7700 FAX (714) 757-2707 City Council City of Tustin Tustin, California October 19, 1992 RODNEY K. McDANIEL, CPA RALPH H. WEINTRAUB, CPA MICHAEL R. LUDIN, CPA ROBERT R. WINE, CPA CRAIG W. SPRAKER, CPA PHILIP H. HOLTKAMP, CPA THOMAS M. PERLC7WSK1, CPA HARVEY I SCHROEDER, CPA In planning and performing our audit of the financial statements of the City of Tustin for the year ended June 30, 1992, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control structure. Our study and evaluation was more limited than would be necessary to express an opinion on the system of internal accounting control taken as a whole and we do not express such an opinion. The management of the City of Tustin is responsible for establishing and maintaining a system of internal accounting control. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of a system are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly. During our audit, we noted certain matters involving the internal control structure and its operation that we wish to call to your attention. These matters did not cause errors in the City's financial records. We believe that each instance noted is insignificant by itself, but could become significant if other weaknesses in the internal control structure were to occur. These matters are set forth below, together with our recommendations for improvement. CASH DISBURSEMENTS We noted one instance in which an invoice supporting cash payment for utility services was not attached to the copy of the check kept by the finance department. The invoice had become detached from the other invoices and was paid again. The duplicate payment was credited correctly to the City's account by the utility service. We recommend that invoices be secured properly to avoid becoming detached resulting in duplicate payment. -1- OTHER OFFICES AT: 2965 ROOSEVELT ST. 613 W. VALLEY PKWY., SUITE 330 CARLSBAD, CA 92008-2389 ESCONDIDO, CA 92025-2552 (619)729-2343 (619)741.3141 (619) 729-2234 FAX (619) 741.9890 FAX CASH DISBURSEME (Continued) We noted that a second payment on a contract for services was supported only by an inter -department memorandum without any additional detail. The original contract was attached to the first payment. All payments requested on inter -department memorandums should at a minimum refer to the original contract and should indicate the amount paid to date to avoid overpayment. PAYROLL We noted an instance in which the time sheet for payroll was not approved by a supervisor. All time sheets should be properly approved. ACCOUNTING We noted that projected transfers -in were not entered into the budget/estimated revenue column of the general ledger. We feel that the City should consider entering the budget/estimated transfers -in into the general ledger so that actual transfers -in can be compared to budget/estimated transfers -in. -- These conditions were considered in determining the nature, timing and extent of the audit tests to be applied in our audit of the City of TVstin financial statements and this letter does not affect our report on these financial statements dated September 9, 1992. This letter is intended solely for the information and use of the City Council, audit committee, management and others within the organization. 'DA..PM; OW4 I�Ov� -2- � Y O Inter -Com V�SllU SATE: DECEMBER 11, 1992 TO: HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL FROM: GEORGE W. JEFFRIES, AUDIT COMMITTEE CHAIRMAN SUBJECT: AUDIT COMMITTEE'S ANNUAL REPORT The City of Tustin Audit Committee reports completion of duties listed in Resolution #88-52. Other activities include: 1. Requested and began receiving monthly Revenue and Expenditure Reports. Reports are sent to a designated member for review and subsequent report to full committee. 2. Reviewed and discussed refinement of, the City's Investment Policy. 3. Reviewed City policy for bidding contracts, (when do we, when we don't). The Committee will be looking into establishing a non -formal bid process and procedures. 4. Discussed potential financial implications of annexations. 5. Reviewed the Mid -year Budget Report with emphasis on sales tax, property taxes, the Self-insured Liability Fund and the Master Plan for Park Development. 6. Reviewed report on City Attorney's legal fees. 7. Reluctantly accepted resignation of Frank Greinke. 8. Installed two new members to the Committee. 9. Established working sub -committees for audit and Investment Policy review. 10. Reviewed scope of work for the June 30, 1992 audit with the auditors. 11. Reviewed and discussed concerns of the state budget impact and current budget crises on future credit rating of City. 12. Inquired as to status of Marine Base closure. Audit Committee Annual Report December 11, 1992 Page 2 13. Reviewed status of RDA fund balances and directed the auditors to take necessary steps to protect RDA resources from a state "take". 14. Discussed current economic conditions throughout state and City specifically with concentration on impact to City. 15. Reviewed issue of sidewalk construction in industrial areas. 16. Reviewed the draft audit report with the auditor and staff and directed its finalization for submittal to the City Council. 17. Recommended that the City continue to submit its Comprehensive Annual Financial Report for both state and national awards. 18. Reviewed Management Letter with auditor. 19. Switched members of audit and investment sub -committees for fresh insight and ideas. 20. Requested copies of specific auditor work sheets for further review. 21. Briefly discussed proposed Brown Act changes. 22. Satisfactorily reviewed internal control, audit practices in light of recent Newport Beach and Los Angeles disclosures. 23. Began discussion of City's deposit policy. GWJ:ls w audi tW. rpt Inter -Com .jATE: DECEMBER 11, 1992 s T TO: CITYVNXLT TIN FROM: RONA SUBJECT: COX" 91 ON THE AUDIT COMMITTEE DIRECTOR OF FINANCE AUDITORIS MANAGEMENT LETTER The following details our actions in response to the findings addressed in the Auditor's Management Letter. Cash Disbursements: Due to the volume of invoices for water, electric and phone bills it is possible for an invoice to become loose and inadvertently be paid twice. All staff has been apprised of this incident and directed to take additional steps to ensure that the proper invoices are attached to the check request before paying and before mailing. Regarding the second payment on a contract, we have been dealing with this matter on an exception basis for several years. The easiest way to deal with partial payments on contracts etc. is through the use of purchase orders. While we have a purchase order option in our general ledger software it is not user friendly and, it does not always work properly; it seems to be one of the weaknesses of our particular system. We are working towards correcting the problems and getting the system operational by next July for the new fiscal year. In the mean time we will be working on an operations document that will fully explain how a purchase order system needs to operate and what procedures are necessary to maintain the integrity of the system. Payroll: We will follow up by sending a memo to each department emphasizing the importance of a supervisor's signature on every time sheet. Accountin In the past the only reason we did not include interfund transfers in the appropriation ledgers is to avoid confusion between the budget document and the ledger. Since it is an easily explained variance and, if it will enhance the audit process, we will plug the transfers into the ledgers as suggested. RAN : l sla moimient s A t r