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HomeMy WebLinkAbout; ; 1991 Federal Financial Assistance audit report; 1991-06-30CITY OF CARLSBAD Schedule of Federal Financial Assistance and Auditors' Reports Required Under the Single Audit Act of 1984 June 30, 1991 CITY OF CARLSBAD, CALIFORNIA Schedule of Federal Financial Assistance and Auditors' Reports Required Under the Single Audit Act of 1984 Year ended June 30, 1991 Table of Contents Page Independent Auditors' Report on Supplementary Schedule of Federal Financial Assistance 1 Schedule of Federal Financial Assistance 2 Notes to Schedule of Federal Financial Assistance k Independent Auditors' Report on Compliance at the General Purpose Financial Statement Level 6 Independent Auditors' Report on Compliance with General Requirements 7 Independent Auditors' Report on Compliance with Specific Major and Nonmajor Program Requirements 8 Special Tests and Provisions 10 Schedule of Findings and Questioned Costs 11 Independent Auditors' Report on Internal Controls at the Federal Financial Assistance Program Level 13 Independent Auditors' Report on Internal Controls at the General Purpose Financial Statement Level 16 Peat Marwick Certified Public Accountants 750 B Street San Diego, CA 92101 Independent Auditors' Report on Supplementary Schedule of Federal Financial Assistance The Honorable Members of City Council City of Carlsbad, California: We have audited the general purpose financial statements of the City of Carlsbad, California (the City) as of and for the year ended June 30, 1991, and have issued our report thereon dated October 8, 1991. These general purpose financial statements are the responsibility of the management of the City. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit was made for the purpose of forming an opinion on the general purpose financial statements of the City of Carlsbad, California taken as a whole. The accompanying schedule of federal financial assistance is presented for purposes of additional analysis and is not a required part of the general purpose financial statements. The information in that schedule has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. fat October 8, 1991 Member Firm ofKlynveld Peat Marwick Goerdeler Schedule CITY OF CARLSBAD Schedule of Federal Financial Assistance For the year ended June 30, 1991 Federal/Pass-Through Grantor/ Federal Program Title CFDA # MAJOR PROGRAM: Lower Income Housing Assistance Program (Section 8-Existing Housing and State Agency Program) 14.156 NONMAJOR PROGRAMS; Housing Voucher Program 14.177 Community Development Block Grant/Entitlement Grants 14.218 Community Development Block Grant/Small Cities Program 14.219 Highway Research, Planning and Construction (FAU Entitlement Program) 20.205 State and Local Government Fiscal Assistance General Revenue Sharing 21.300 National Endowment for the Arts - Locals Program 45.023 Special Programs for the Aging, Title III, Parts A & B 13.633 Special Programs for the Aging, Title III, Part C, Nutrition Services 13.635 Pass- Through Agency Pass- Through Total Grantor's # Expenditures N/A N/A N/A N/A N/A N/A 26299-E M-510K10) $ 1,751,393 148,454 208,026 77,325 49,389 N/A N/A C N/A N/A 29521 5,272 11,539 7,989 29521 169,727 (Continued) Schedule. Continued CITY OF CARLSBAD Schedule of Federal Financial Assistance, Continued For the year ended June 30, 1991 Pass- Pass- Federal /Pass-Through Grantor/ Federal Through Through Total Program Title CFDA # Agency Grantor's # Expenditures NONMAJQR PROGRAMS. Continued; National Park Service, Department of the Interior (Historic Preservation Survey) 15.904 D 89-11-211 $ 10,042 Library Partnership-for-Change (Latino Outreach) 84.034 E 40-1954 24.513 $ 2.463.669 Pass-Through Agency; A. The County of San Diego, California. B. The California Department of Transportation. C. The San Diego County Department of the Area Agency on Aging. D. The California Department of Parks and Recreation. E. The California State Library. See accompanying notes to schedule of federal financial assistance. 3 CITY OF CARLSBAD Notes to Schedule of Federal Financial Assistance For the year ended June 30, 1991 (1) General The accompanying schedule of federal financial assistance presents the expenditures of all federjil financial assistance programs of the City of Carlsbad (the City). The City's reporting entity is defined in Note 1 to the City's general purpose financial statements. All expenditures of federal financial assistance received directly from federal agencies as well as expenditures of federal financial assistance passed through other government agencies are included in the Schedule. (2) Basis of Accounting The accompanying schedule of federal financial assistance is presented using the modified accrual basis of accounting, which is described in Note 1 to the City's general purpose financial statements. (3) Relationship to General Purpose Financial Statements Federal financial assistance program revenues and expenditures are reported in the City's general purpose financial statements as follows: Special Revenue Funds: Community Development Block Grant Federal Grants (National Endowment for the Arts and Partnerships-for- Change) Section 8 Housing Authority Senior Nutrition Capital Projects Funds: Community Development Block Grant Federal Grants (FAU Entitlement and Historic Preservation) Revenue Sharing Fund Bcilance (Deficit) June 30, 1990 $ 525,200 (13,461) 113,5459,554 Revenues Expenditures Transfers 28,212 75,366 1,899,457 168,162 (41,648) 326,999 (1,693,251) 222.256 1,535,065 18.616 36,052 1,899,847 177,716 285,351 59,431 5.272 Fund Balance June 30, 1991 553,412 20,853 118,155 Total $ (877.805) 4.051.877 2.463.669 (17.983) 692.420 (Continued) CITY OF CARLSBAD Notes to Schedule of Federal Financial Assistance, Continued (4) Highway Research. Planning and Construction Grant During fiscal year 1990-1991, all legal action between the City and CALTRANS relating to the Highway Research, Planning and Construction Grant was settled. As of June 30, 1991, the City has filed all claims for reimbursement, and all amounts have been reimbursed by CALTRANS. In its settlement with the City, CALTRANS stated that no findings have been or will be made on the question of contract compliance or project supervision. The State of California has agreed not to audit or otherwise review, at any time in the future, the Highway Research, Planning, and Construction program for contract compliance, project supervision, or any other question of compliance with the Master Agreement, program supplement, or regulations and procedures. Peat Marwick Certified Public Accountants 750 B Street San Diego. CA 92101 Independent Auditors' Report on Compliance at the General Purpose Financial Statement Level The Honorable Members of City Council City of Carlsbad, California: We have audited the general purpose financial statements of the City of Carlsbad, California (the City) as of and for the year ended June 30, 1991, and have issued our report thereon dated October 8, 1991. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. Compliance with laws, regulations, contracts, and grants applicable to the City is the responsibility of the City's management. As part of obtaining reasonable assurance about whether the general purpose financial statements are free of material misstatement, we performed tests of the City's compliance with certain provisions of laws, regulations, contracts, and grants. However, our objective was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion. The results of our tests indicate that, with respect to the items tested, the City complied, in all material respects, with the provisions referred to in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the City had not complied, in all material respects, with those provisions. This report is intended for the information of members of City Council, management of the City and the Controller of the State of California. This restriction is not intended to limit the distribution of this report, which is a matter of public record. October 8, 1991 Member Firm of Klynveld Peat Marwick Goerdeler Peat Marwick Certified Public Accountants 750 B Street San Diego, CA 92101 Independent Auditors' Report on Compliance with General Requirements The Honorable Members of City Council City of Carlsbad, California: We have audited the general purpose financial statements of the City of Carlsbad, California (the City), as of and for the year ended June 30, 1991, and have issued our report thereon dated October 8, 199.1. We have also applied procedures to test the City's compliance with the following requirements applicable to its major federal financial assistance program, which is identified in the schedule of federal financial assistance, for the year ended June 30, 1991: Political activity Civil rights Cash management Davis Bacon Act Drug-Free Workplace Act Federal financial reports Allowable costs/cost principles Our procedures were limited to the applicable procedures described in the Office of Management and Budget's Compliance Supplement for Single Audits of State and Local Governments. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the City's compliance with the requirements listed in the preceding paragraph. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the second paragraph of this report. With respect to items not tested, nothing came to our attention that caused us to believe that the City had not complied, in all material respects, with those requirements. However, the results of our procedures disclosed an immaterial instance of noncompliance with those requirements, which is described in the accompanying schedule of findings and questioned costs. This report is intended for the information of members of City Council, management of the City and the Controller of the State of California. This restriction is not intended to limit the distribution of this report, which is a matter of public record. October 8, 1991 Member Firm of Klynveld Peat Marwick Goerdeler Peat Marwick Certified Public Accountants 750 B Street San Diego, CA 92101 Independent Auditors' Report on Compliance with Specific Maior and Nonmaior Program Requirements The Honorable Members of City Council City of Carlsbad, California: We have audited the general purpose financial statements of the City of Carlsbad, California (the City), as of and for the year ended June 30, 1991, and have issued our report thereon dated October 8, 1991. We have also audited the City's compliance with the requirements governing types of services allowed or unallowed; eligibility; reporting; special tests and provisions as identified in the attachment; and claims for advances and reimbursements that are applicable to its major federal financial assistance program, which is identified in the accompanying schedule of federal financial assistance, for the year ended June 30, 1991. The management of the City is responsible for the City's compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States, and Office of Management and Budget (OMB) Circular A-128, Audits of State and Local Governments. Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the City of Carlsbad, California, complied, in all material respects, with the requirements governing types of services allowed or unallowed; eligibility; reporting; special tests and provisions as identified in the attachment; and claims for advances and reimbursements that are applicable to its major federal financial assistance program for the year ended June 30, 1991. Member Firm of Klynveld Peat Marwick Goerdeler In connection with our audit of the 1991 general purpose financial statements of the City and with our study and evaluation of the City's internal control systems used to administer federal financial assistance programs, as required by OMB Circular A-128, we selected certain transactions applicable to certain nonmajor federal financial assistance 'programs for the year ended June 30, 1991. As required by OMB Circular A-128, we have performed auditing procedures to test compliance with the requirements governing types of services allowed or unallowed and eligibility that are applicable to those transactions. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the City's compliance with these requirements. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the City had not complied, in all material respects, with those requirements. This report is intended for the information of members of City Council, management of the City and the Controller of the State of California. This restriction is not intended to limit the distribution of this report, which is a matter of public record. October 8, 1991 Attachment CITY OF CARLSBAD Special Tests and Provisions Year ended June 30, 1991 Program Compliance Requirement Lower Income • The Public Housing Agency (PHA) is required to review the Housing contract rent and utility allowances for each unit to Assistance assure that they do not exceed certain rent limitations. Program • The PHA is required to annually adjust contract rents and tenant utility allowances, upon request from the owner. Special adjustments may also be granted to the extent determined necessary by the PHA and HUD. * The PHA is required to conduct an initial (and annually thereafter) inspection of units prior to executing the housing assistance payment contract to insure that the unit meets Housing Quality Standards (applies to existing housing and moderate rehabilitation programs only). 10 CITY OF CARLSBAD Schedule of Findings and Questioned Costs Year ended June 30, 1991 PROGRAM; Drug-Free Workplace Act Finding: The City has not published a policy statement notifying employees that the unlawful manufacture, distribution, dispensing, possession or use of a controlled substance is prohibited in the City's workplace. Recommendation: The City should finalize its draft policy statement with regard to the Drug-Free Workplace Act. Once the policy statement is finalized, it should be published in order to ensure that all employees are notified that compliance is required. City's Response: The City has concluded its meet and confer obligation, as defined by the Meyers-Millias-Brown Act, with the Carlsbad City Employees' Association. The City is currently finalizing its meet and confer obligation with both the Carlsbad Police Officers' Association and the Carlsbad Firefighters' Association. At the conclusion of these discussions, the City will be publishing the policy and will further conduct training with all employees, managers and supervisors in compliance with the Drug-Free Workplace Act. STATUS OF PRIOR YEAR FINDINGS PROGRAM; Lower Income Housing Assistance Program Findings #1 and #2 The City has begun to develop a contents checklist within tenant files to ensure all required documents are in place and properly reviewed. The file is to be reviewed and signed off by Housing Division management after all actions have been completed to assure all critical up-to-date documents are in the file. 11 CITY OF CARLSBAD Schedule of Findings and Questioned Costs, Continued Year ended June 30, 1991 PROGRAM: Highway Research. Planning and Construction Finding/Questioned Costs As documented in the 1989-1990 single audit, no claims for reimbursement had been submitted by the City. The FHA had rejected all previous claims. All legal action was settled during the 1990-1991 fiscal year, all claims have been filed by the City, and amounts have been reimbursed by CALTRANS as of June 30, 1991. In its settlement with the City, CALTRANS stated that no findings have been or will be made on the question of contract compliance or project supervision. The State of California has agreed not to audit or otherwise review, at any time in the future, the Highway Research, Planning, and Construction program for contract compliance, project supervision, or any other question of compliance with the Master Agreement, program supplement, or regulations and procedures. Therefore, the conditions disclosed in the Single Audit for the year ended June 30, 1990 have been satisfactorily resolved. 12 Peat Marwick Certified Public Accountants 750 B Street San Diego. CA 92101 Independent Auditors' Report on Internal Controls at the Federal Financial Assistance Program Level The Honorable Members of City Council City of Carlsbad, California: We have audited the general purpose financial statements of the City of Carlsbad, California (the City), as of and for the year ended June 30, 1991, and have issued our report thereon dated October 8, 1991. We have also audited the City's compliance with requirements applicable to major federal financial assistance programs and have issued our report thereon dated October 8, 1991. We conducted our audits in accordance with generally accepted auditing standards; Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Circular A-128, Audits of State and Local Governments. Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement and about whether the City complied with laws and regulations, noncompliance with which would be material to a major federal financial assistance program. In planning and performing our audits for the year ended June 30, 1991, we considered the City's internal control structure in order to determine our auditing procedures for the purpose of expressing our opinions on the City's general purpose financial statements and on its compliance with requirements applicable to major programs and not to provide assurance on the internal control structure. This report addresses our consideration of internal control structure policies and procedures relevant to compliance with requirements applicable to federal financial assistance programs. We have addressed policies and procedures relevant to our audit of the general purpose financial statements in a separate report dated October 8, 1991. The management of the City is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and 13 Member Firm of Klynveld Peat Marwick Goerdeler related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of general purpose financial statements in accordance with generally accepted accounting principles, and that federal financial assistance programs are managed in compliance with applicable laws and regulations. Because of inherent limitations in any internal control structure, errors, irregularities, or instances of noncompliance may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. For the purpose of this report, we have classified the significant internal control structure policies and procedures used in administering federal financial assistance programs in the following categories: Accounting Controls • Purchases/disbursements • External financial reporting Administrative Controls General requirements: Political activity Civil rights Cash management Davis Bacon Act Federal financial reports Allowable costs/cost principles Drug-Free Workplace Act Specific requirements; • Types of services • Eligibility • Reporting • Special requirements, if any For all of the internal control structure categories listed above, we obtained an understanding of the design of relevant policies and procedures and determined whether they have been placed in operation, and we assessed control risk. 14 During the year ended June 30, 1991, the City expended 71 percent of its total federal financial assistance under major federal financial assistance programs. We performed tests of controls, as required by OMB Circular A-128, to evaluate the effectiveness of the design and operation of internal control structure policies and procedures that we considered relevant to preventing or detecting material noncompliance with specific requirements, general requirements, requirements governing claims for advances and reimbursements, and amounts claimed or used for matching that are applicable to the City's major federal financial assistance program, which is identified in the accompanying schedule of federal financial assistance. Our procedures were less in scope than would be necessary to render an opinion on these internal control structure policies and procedures. Accordingly, we do not express such an opinion. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a reportable condition in which the design or operation of one or more of the internal control structure elements does not reduce to a relatively low level the risk that noncompliance with laws and regulations that would be material in relation to a federal financial assistance program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control structure and its operations that we considered to be material weaknesses as defined above. We also noted other matters involving the internal control structure and its operation that we have reported to the management of the City of Carlsbad, California in a separate letter dated October 8, 1991. This report is intended for the information of members of the City Council, management of the City, and the Controller of the State of California. This restriction is not intended to limit the distribution of this report, which is a matter of public record. October 8, 1991 15 Peat Marwick Certified Public Accountants 750 B Street San Diego, CA 92101 Independent Auditors' Report on Internal Controls at the General Purpose Financial Statement Level The Honorable Members of City Council City of Carlsbad, California: We have audited the general purpose financial statements of the City of Carlsbad, California (the City), as of and for the year ended June 30, 1991, and have issued our report thereon dated October 8, 1991. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. In planning and performing our audit of the general purpose financial statements of the City for the year ended June 30, 1991, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on the internal control structure. The management of the City is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure 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 to permit the preparation of general purpose financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. 16 Member Firm of Klynveld Peat Marwick Goerdeler For the purpose of this report, we have classified the significant internal control structure policies and procedures in the following categories: Accounting Controls • Investments • Revenue/receipts • Purchases/disbursements • External financial reporting Controls Used in Administering Federal Programs General requirements: Political activity Civil rights Cash management Davis Bacon Act Federal financial reports Allowable costs/cost principles Drug-Free Workplace Act Specific requirements: • Types of services • Eligibility • Reporting • Special requirements, if any Our consideration of the internal control structure included all of the control categories listed above except that we did not evaluate the internal control structure over investments or the revenue/receipts cycle because we believed the audit could be performed more efficiently by expanding substantive testing rather than placing reliance on the internal control structure and because these categories are not significant to the major federal financial assistance program. The purpose of our consideration of the internal control structure was to determine the nature, timing, and extent of the auditing procedures necessary for expressing an opinion on the general purpose financial statements. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of one or more of the specific internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the general purpose financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control structure and its operation that we consider to be material weaknesses as defined above. 17 However, we noted certain matters involving the internal control structure and its operation that we have reported to the management of the City in a separate letter dated October 8, 1991. This report is intended for the information of members of City Council, management of the City, and the Controller of the State of California. This restriction is not intended to limit the distribution of this report, which is a matter of public record. October 8, 1991 18