HomeMy WebLinkAboutCC 4 AUDIT AG FY 6-30-89 6-5-89 CONSENT CALENDAR
NO. 4
~-- ,'~ 6 5 89
: MAY 31, 1989
TO:
FROM:
SUBJECT:
WILLIA~ A. HUSTON, CITY MANAGER
RONALD A. NAULT, DIRECTOR OF FINANCE
AUDIT AGREEMENT FOR FISCAL YEAR ENDING 6-30-89
RECOMMENDATION:
Authorize the Finance Director to sign the Proposal for Audit
Services submitted by Diehl, Evans and Company in the amount of
$21,850.00
DISCUSSION:
In its Annual Report to the City Council, the Audit Committee
recommended that the Audit Agreement with our present external
auditors, Diehl, Evans and Company, should be extended for an
additional year. The attached proposal is for the fiscal year
ending June 30, 1989 only. The total fee as proposed is
$21,850.00. This includes the addition of an audit of the Police
Department property and evidence., ~nd an ~audit of our Cable T.V.
Franchise. The proposed fee is only 6 percent above last years
cost, less the additions.
on~Zd A..~au±c - ' -" .......
Director of Finance
RAN:ls
Attachment
t
DIEHL, EVANS
'COMP
C'ERTIFII:D PUBUC ACCOUNTANTS
& P~ II~C~ ACCOUIqT&NCI' C'ORPORATION$
1910 NORT~ BUSH STREET
SANTA ANA · CAUI:ORNLA 92706-2894
PHONE ('714) 542-44.53
FAX (7'14) 5424218
April 3, 1989
FINANc£
DONALD E. CALLAHAN. CPA
L. PLrlT. R $CH£1~;R, CPA
RODNL~' K. ~kDANIEL, CPA
RALPH H. WEINTRAU~, CPA
MICHAEL R. LUDINo CPA
ROBERT R. WINE, CPA
PHIUP H. HOLTKAMP0 CPA
THOMAS M. PERLOWSKI, CPA
Mr. Ronald Nault
Finance Director
City of Tustin
300 Centennial Way
Tustin, CA 92680
Dear Mr. Nault:
You have requested an auiit proposal for the year ending June 30, 1989. Our
proposed services and proposed fees are summarized below.
Proposed Audit Services
·
~he City audit will be a financial review of all furds. Specifically, we will
examine the'general purpose ~financial statements of the City of Tustin. The
financial statements of the Redevelopment A&~ency and Water Corporation will be
audited and czm~in~ with the City's financial statements, .in accordance with
GASB Code Section 2100. Our examinations will be in accordance with generally
accepted auditing standards and will include such auditing procedures as we
consider necessary under the circumstances. The ccmb~, individual fund and
account group financial statements will. be subjected to auditing procedures in
relation to the general purpose financiai statements taken as a whole. The
scope of our examinations will not include any statistical information, and we
will not express an opinion concerning it. We will issue a separate report on
the Agency which will include an opinion on compliance with the rules and
regulations for redevelopment agencies, as published by the Office of State
Controller. Also, we will issue a separate report on the Water Corporation.
A single audit will be performed on the City's federal grant programs in
accordance with C{4B Circular A-128, and a separate report will be issued on
these programs.
In connection with the City audit, a complete review of internal controls will
be made of all significant accounting procedures, including computer related
applications. Upon completion of the audit, our firm will submit a management
letter which shall identify weaknesses observed, assess their effects on
financial management and recommend steps toward eliminating the weaknesses.
Also in connection with the City audit, we will perform special procedures with
re~ to investments and cash disbursements. For investments, we will extend
our normal audit steps to include procedures similar to those set forth in
Attachment 1. With reqard to cash disbursements, we will test all disbursements
over $10,000 (except that not all investment transactions during the year will
be ~s~).
OTHF, R OFFICES AT:
29~ ROOSEVELT ST.
CARLSBAD, CA 92008-2389
(619) 7'29-2:M3
120 WEST WOODWARD AVE.
ESCONDIDO, CA 92U25-99~
(619) 741-.t141
Mr. Ronald Nault April 3, 1989
city of Tustin ~ Page 2
~ o.
~he fees proposed herein contemplate that conditions satisfactory to the normal
progress and completion of the examination will be encountered and the City
accounting personnel will furnish the agreed upon assistance in connection with
the audit. However, if unusual circumstances are encountered which make it
necessary for us to do additional work, we shall report such conditions to you
and provide an estimate of the additional accounting fees involved.
Noted below is a listing of work required by City staff to assist in the audit:
1. Preparation of trial balances for all funds, after posting of all year end
journal entries.
2. Preparation of supporting schedules for all material balance sheet accounts,
and selected revenue and expendi~e accounts.
3. Typir~ of all conf~tion requests.
4. Pulling and refiling of all supporting documents
verification.
required for audit
,
Our tentative time schedule for the various phases of the audit is as follows:
Begin testing work
Begin year end audit work
Deliver CAFR and Management Letter
Deliver Redevelopment A~ency Report
Deliver Single Audit of Federal Grants
May 15, 1989
August 15, 1989
Oct~ 15, 1989
November 15, 1989
December 15, 1989
We will be available for attendance at meetings of the Audit Committee or ~ity
Council throughout the year. The fees proposed herein include attendance at
such meetings up to eight hours.
Proposed Services for Police DeDart~ent
You have requested that we ~ procedures for property retention by the
Police De~t. We have reviewed the City's property retention policy and
the' related correspondence that you forwarded to us. Based on the information
in these documents, we propose to perform the following services:
le
We will meet with employees of the Police Department and Finance Department
to review the existing procedures for handling cash and other property
obtained as evidence, cash held for safekeeping, "found" cash, and cash
received from the auction of confiscated property.
2. We will review existing laws and ad~tive rules regarding the handling
of property obtained by the Police Department, including cash.
Mr. Ronald Nault
CiG/of Tustin
April 3, 1989
Page 3
3. we will reccmm~_nd written procedures for the handling of property and cash
funds of the Police De~t, including the:
a. Docxm~_ntation of the receipt of cash and property. -
b. Saf~,arding of property under Police Department control.
C. Authorization of transf~ of property and cash from Police Department
control.
.
We will design any necessary forms, or propose changes in existing forms, in
order to implement the procedures and provide for the proper approval of all
5. We will ~t with members of the Police Department and Finance Department to
review our suggested procedures.
Proposed Review of Cable T.V. Revenue
It is our understanding that two Cable T.V. companies operate within the City of
Tustin, and that these companies report gross receipts to the City periodically,
and pay a franchise fee based on the gross receipts. In connection with these
fees, we will perform the following services.
1. We we ~ill review the ord/nances and agreements related to the Cable T.V,
0
We will review the records of each Cable T.V. Company, and agree the amounts
reported to the City with the Company records. Where possible, we will
agree the Comp~ly's revenues to other documents, such as income tax returns,
financial statements, etc. we will. review each Company's internal controls
over revenue.
3. We will test the amount of fees reported to the City.
4. We will issue a "limited procedures review report" in accordance with
Statement on Auditing Standards No. 35.
Proposed Fees
Our proposed fees for these services are as follows:
·
City audit
Water Corporation
Single Audit of Federal Grants
Police Department Review
Cable T.V. Revenue r,-~ mited
Procedures Review
$9,950
3,000
1,000
3,500
2,900
1,500
Mr. Ronald Nault April 3, 1989
City of Tustin Page 4
·
The maximum fees above cover only the work set forth in this proposal. Other
semvices will be billed separately. Hourly rates for additional services would
be as follows-'. -
nudin $ 150.00
Morgan 110.00
Patel 50.00
Assistants 40.00
If the terms and conditions in this letter are acceptable,
signing the enclosed copy, and return for our files.
Please indicate by
Very truly yours,
DIF&{L, EVANS AND
·
SUpPC£MENTAC AUDIT -~-ROGR'AM
EXAMINATION OF INVESTMENTS
INVESTMENT POLICY AND REPORTS:
1. Assembly Bill 1073, which became effective
January 1, 1985, requires the Treasurer or Chief
Fiscal Officer to annually render to the City
Council a "Statement of Investment Policy".
Verify that such a statement has been rendered
to the City Council.
·
2. Assembly Bill 1073 also requires the Treasurer
or Chief Fiscal Officer to make a monthly report
to the Chief Executive Officer (City Manager) and
City Council, effective as of January 1, 1985. The
report must show the type of investment, institution,
date of maturity, amount of deposit, 'current market
values for all securities with a maturity of more than
12 months, rate of interest and other data the City'
Council may require.
a. Verify that the investment report is being
submitted to the City Manager and City Council.
on a monthly basis.
b. For securities with a maturity.date of more than
12 months, review the client's computation of
market values for reasonableness.
INTERNAL CONTROLS:
1. All investments should be properly collateralized.
Government Code Section 53649 specifies that the
treasurer is responsible for entering into contracts
with each depository. Section 53652 requires that
the depository pledge securities with a market value
at least 10% in excess of the City's deposits. Verify
that contracts are on file for each depository.
2. Investment decisions should be subject to a review
and approval procedure. For example, if the
Treasurer is responsible for making the individual
investment decisions, each investment should be
approved by a second fiscal officer, such as the
finance director. This dual approval should be
documented for each transaction. Determine if
investment decisions are subject to dual approvals.
·
Initials Date' -.
"ATTACHMENT 1"
OF
SUPPLEMENTAL AUDIT PROGRAM
EXAMINATION OF INVESTMENTS
(Continued)
Initials Date ·
INTERNAL CONTROLS (CONTINUED):
3. Segregation of Duties:
a. The functions of record keeping and custody of
cash and investments should be properly segregated.
The finance department should receive information
regarding investment transactions from a source '
other than the Treasurer or custodian of investments.
This may require that additional copies of
investment advices be mailed from the bank or
broker directly to the finance department. Verify
that, with regard to investments, accounting
entries into the general ledger originate from
a source other than the Treasurer or custodian
of investments.
b. Alternatively, if G/L source entries originate
with the Treasurer or custodian, determine that
t.he data is verified for accuracy by other City
personnel.
REPURCHASE AGREEMENTS:
From a legal standpoint, a Repo Agreemen. t is often viewed as a loan, secured by
an underlying government security. From the standpoint of the broker-dealer,
the repo is referred to as a "reverse-repo". If the City engages in repo
transactions, perform the following steps:
1. Determine if the Repos are purchased from large
banks or well-established, financially sound
securities dealers?
-.
2. Determine if the Repos are written against specific
government securities?
3. Third-party safekeeping. Most cities do not accept
physical delivery of the securities themselves. For
physical securities like certain Treasury notes and
bonds, GNMAs and other collateral instruments, most
cities rely upon a bank trust department or other
custodian to hold the collateral during the term of
the repo. If this is done, a sep4rate safekeeping
receipt should be issued by the custodian. A City
should never, under any circumstances, accept the
repo issuer's word as an assurance of custodian
ownership. Internal control procedures should be
established for veri.fication of the custodial
safekeeping arrangement. Determine if such internal
controls are in effect.
Y OF
EXAMINATION OF INVESTMENTS
(Continued)
MANAGEMENT LETTER:
Discuss in the management letter any weaknesses noted
above, and our recommendations for improvement
Initials Date