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Home My WebLink About1992-02-11; City Council; 11549; 1990-91 Annual Financial Reportsr d g pe: R 2 z 0 F 0 a i3 -I Z 3 0 0 Crj OF CARLSBAD - AGE- BILL 27 AB # I/,s’lCi TITLE: DEPT MTG. 2/11/91 . 1990-91 ANNUAL FINANCIAL REPORTS CITY DEPT. FIN CITY RECOMMENDED ACTION: Accept the 1990-91 City of Carlsbad Comprehensive Annual Financial Report (CAFR), and the Annual Reports for the Parking and Building Authorities, and the Public Improvement Corporation. LTEM EXPLANATION: Each year, an independent auditor examines the City‘s financial records and for the f~~rth year, the audit firm of KPMG Peat Marwick was retained. The audit process requires several months of on-site examination, resLirlg, drA& rec,=-~ci~i~tic= of investments, bank statements, accounting records, warrants issued, payroll records, appropriations, fixed assets, revenues and expenditures. The end result is an opinion on the fairness of the presentation of the financial data within the reports. This year, as in the past, we received an unqualified opinion on all of our annual reports. In addition, Carlsbad‘s CMR has received awards for excellence from the Government Finance Officers Association of the United States and Canada (GFOA) and the California Society of Municipal Finance Officers (CSMFO) since 1986. The combined assets of the City of Carlsbad now total $331 million, with fixed assets comprising 48% of the total and cash and investments at 30% of the total. Total expenditures were $91.9 million, an increase of $19.7 million over 1989- 90. This rise is primarily due to an increase of $15.7 million on capital projects (Alga Road Assessment District) and higher General Fund expenditures of $3.2 million. Combined revenues totaled $98.9 million, an increase of about $20.8 million or 26.6% over last year‘s total of $78.2 million. This increase is directly linked to several factors including: the sale of Alga Road assessment district bonds, a continued increase in the City‘s property tax base, higher collections of special benefit district charges for lighting and landscaping, and higher charges from internal service funds to the user departments. Further information regarding the City‘s operations and achievements this year can be found in the CAFR Letter of Transmittal for the 1990-91 CAFR. The CAFR includes all entities for which the City exercises oversight responsibili- ty. This responsibility includes, but is not limited to, the authority to govern, manage, approve budgets and assume fiscal responsibility. Using this definition * ,- 4 rc Page Two of Agenda Bill No. //, (Tqy as a guide, the 1990-91 CAFR includes the financial transactions of the following legal entities: The City of Carlsbad The Carlsbad Municipal Water District The Parking Authority of the City of Carlsbad The Building Authority of the City of Carlsbad The City of Carlsbad Public Improvement Corporation The Carlsbad Redevelopment Agency Due to various legal requirements and/or managerial needs, separate financial statements are prepared for each of the above entities and have been previously distributed to the respective governing bodies. Additional copies are on file with the City Clerk and the Finance Department. FISCAL IMPACT: The CAFR and the other financial reports present the financial condition of the City and its related entities as of June 30, 1991. As the economy changes, the financial condition of the City also changes. In order to maintain a good understanding of our complex financial picture, financial updates are given to Council on a quarterly, or as needed basis. EXHIBITS: Council has previously received audit copies. Audits are on file with the City Clerk and Finance Department. 1. Comprehensive Annual Financial Report for the fiscal year ended June 30 1991. Parking Authority of the City of Carlsbad, Combined Financial Statement! for fiscal year ended June 30, 1991. Building Authority of the City of Carlsbad, Combined Financial Statement: for fiscal year ended June 30, 1991. City of Carlsbad Public Improvement Corporation, Combined Financia Statements for fiscal year ended June 30, 1991. 2. 3. 4. 1661 ‘OE aunf 9861 30 2aV J?PnV a-Csu?S aW JaPun paqnbax sqzodax ,s~o~~pnv pue ac3umsTssV 1qaueu;~ Tsiapad 30 appayas avas1m3 60 XI3 w CITY OF CARLSBAD, CALIFORNIA Schedule of Federal Financial Assistance and Auditors' Reports Required Under the Single Audit Act of 1984 Year ended June 30, 199L e Table of Contents Independent Auditors' Report on Supplementary Schedule of Federal Financial Assistance 0 Schedule of Federal Financial Assistance Notes to Schedule of Federal Financial Assistance Independent Auditors' Report on a Compliance at the General Purpose Financial Statement Level Independent Auditors' Report on Compliance with General Requirements Independent Auditors' Report on Compliance with Specific Major and Nonmajor Program Requirements I, Special Tests and Provisions Schedule of Findings and Questioned Costs Independent Auditors' Report on e Internal Controls at the Federal Financial Assistance Program Level Independent Auditors' Report on Internal Controls at the General Purpose Financial Statement Level e e e W v Peat Marwick Certified Public Accountants 750 B Street San Diego, CA 92101 e Independent Auditors' Report of Federal Financial Assistance 0 on Supplementary Schedule The Honorable Members of City Council I) City of Carlsbad, California: We have audited the general purpose financial statements of the Cit Carlsbad, California (the City) as of and for the year ended June 30, and have issued our report thereon dated October 8, 1991. These ge purpose financial statements are the responsibility of the management oj City. Our responsibility is to express an opinion on these general pu. financial statements based on our audit. We conducted our audit in accordance with generally accepted aud: standards and Government Auditing Standards, issued by the Comptroller Ger of the United States. Those standards require that we plan and perforrr audit to obtain reasonable assurance about whether the financial stater are free of material misstatement. An audit includes examining, on a basis, evidence supporting the amounts and disclosures in the general pui f inancia1 statements. An audit also includes assessing the accoui * evaluating the overall financial statement presentation. We believe that 0 c) principles used and significant estimates made by management, as we1 audit provides a reasonable basis for our opinion. Our audit was made for the purpose of forming an opinion on the ger purpose financial statements of the City of Carlsbad, California taken whole. The accompanying schedule of federal financial assistance is presc for purposes of additional analysis and is not a required part of the ger purpose financial statements. The information in that schedule has subjected to the auditing procedures applied in the audit of the ger purpose financial statements and, in our opinion, is fairly stated in material respects in relation to the general purpose financial staten taken as a whole. a 0 kfM6 &A& October 8, 1991 a - 1 Werrber Firm of ~ - Klynveld Pear Marack Goe-deler (PanurJuo3) Z LZL '691 lZS6Z 3 SE9'EI Sa3TA.TaS UOlJ:.J>nN '3 q=ed '111 al??;C '%u$~v aqa 203 sure;c8oq praads TZSbZ 3 C€9'€1 g '9 v Srl-=d '111 aI7T.r' 686'1 6€S'11 V/ N V/ N EZO'S9 UE2%02d sp307 - S?nj (2u;%v aq 203 sure~2oid 1eiaadS aqq 203 auamopug -[suo;~~N ZLZ ' s V/N V/ N OOE ' 1z Su.~xeqs anuaaax -paua3 a3ueasrssg p3sg quamanog p301 pue aqe~~ 68€'69 ( 01 1 101 s-w 5I soz - 02 (rnI20JJ JuamaTJyuz nvd) uor~3n~~suo3 SZE'LL 3-66292 V 6ZZ'tlZ WJ%OSd sarqg -[purs/~ul?23 920'802 V/N V/N 8SZ'tlT: squeq q uawa 'I 2 T qu1/ 7 UEJ3 pue 8uiuueld 'qxeasax L~M~%-cH y3o~g quamdo-[ahaa bqyununuo~ 313018 r)uaurdoIahaa dr)yunuauoa 9Sr7'891 V/N V/ N LLT.91 UEJSOJJ xaq3noA %u?snoH :SW308d XOrWON E6E'TS'L'T $ V/N V/ N 9ST.91 (urei80q Lxxa8v aqeqs pue urei%oid a3ueqsrsstJ gU?STlOH 8UyJSyXz-8 UOyq3aS) %u?SnoH aUIo3u1 SaMoT :wmow aorm sain3rpuadq j/ s, .IOJU~X=) ~3uaav +/ vam aT7rL ~J~02d T"3O;l @no 2 q;L q%noiq;l Ie.xapaj /ioqueq q%noiqL-sse&/-piapad -SSSd -ssed 5661 'OE a-r PaPUa zead aq3 JO,!l a3uEqs:ssv ~q3u-eu-t~ p2apa.q 30 aTnpaqDS avwxv3 60 x13 aPParl3S E *a3ueqs?sso ppueu?3 -papa3 30 appaqas 03 saqou %u?buvduro3x aaS *XiexqyT s.3~3~ ayuio3rp3 aq~ -3 *a -3 -8 -e~ruo3?3?3 (o%aTa ur?~ 30 d~uno3 aq;~ *v :A3uaag qznoiq;C-ssed *uo~~~ama~ pu-e sysq 30 quaulmdaa 1qu103-tt~3 aq~ *%u?2iv uo dsua8v eaq aqq 30 auaurqzvdaa bquno3 o8aIa ues aq;L .uo?qeqiodsueiL 30 quaurqiedaa e?u103~~e3 aq;l 699"Z$ ETS'QZ 9561-09 a i7€0'98 (q=aJmo OUT~PT) a%uey3-io3-d?qsiau~~ed LJeJq?? Z9O'OT $ 111-T1-68 a 906 * 51 (LaAinS uoTqeAiasaid 3~ioqsr~) io?iaquI aqq 30 quaurqledaa 'a3puas ymq SEUOT~~N :Panu?rluW 'SW30Xd X0f'V"ON sa~nqypuadx3 11 S,JOI)U=~ -v 11 vam a13?L mJaoJd 1e20;L rZ%noJrlL q8noq;t pJapad jioquei3 y%noiqL-ssea/-piapad -ssed -ssea T661 'OE amr PaPua lead arl2 JOB panuyquoa 6a3ueAs;ssg ~E~DUEU~J Ieiapad 30 alnpaq3S avgsmv3 BO n13 panuTjuo3 'a~npaq3~ - 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 expenditures of all federal financial assistance programs of the of Carlsbad (the City). The City's reporting entity is define Note 1 to the City's general purpose financial statements. expenditures of federal financial assistance received directly federal agencies as well as expenditures of federal final assistance passed through other government agencies are included ir Schedule. (2) Basis of Accounting The accompanying schedule of federal financial assistance is pres( using the modified accrual basis of accounting, which is describe Note 1 to the City's general purpose financial statements. a (3) RelationshiD to General Purpose Financial Statements Federal financial assistance program revenues and expenditures reported in the City's general purpose financial statements as follc a Fund Balance FI (Def i ci t) Bal June 30, Junc 1990 Revenues Expenditures Transfers - 1' Speci a1 Revenue Funds : Community Development Block Grant $ 525,200 28,212 - - 553, Federal Grants (National Endowment for the Arts and Partnershi ps-for- Change ) (18,461) 75,366 36,052 - Senior Nutrition 9,554 168,162 177,716 - Capital Projects Funds: Community Development Block Grant (41,648) 326,999 285,351 - Federal Grants 20, Section 8 Housing Authority 118,545 1,899,457 1,899,847 - 118, 0 (FAU Entitlement and Historic Preservation) (1,693,251) 1,535,065 59,431 217,617 Revenue Sharing 222.256 18.616 5,272 (235.600) L Total $ (877.805) 4,051.8 77 2.463.m (17.983) u e 9 (Con t in, 4 @ W CITY OF CARLSBAD Notes to Schedule of Federal Financial Assistance, Continued 0 (4) Highway Research, Planning and Construction Grant During fiscal year 1990-1991, all legal action between the City CALTRANS relating to the Highway Research, Planning and Constru Grant was settled. As of June 30, 1991, the City has filed all c. for reimbursement, and all amounts have been reimbursed by CALTI In its settlement with the City, CALTRANS stated that no findings been or will be made on the question of contract compliance or prc supervision. The State of California has agreed not to audi otherwise review, at any time in the future, the Highway Rese: Planning, and Construction program for contract compliance, prc supervision, or any other question of compliance with the M: Agreement, program supplement, or regulations and procedures. e d @ 5 KP!G- Peat Marwick Certified Public Accountants 750 B Street San Diego. CA 92101 Independent Auditors ' Report m on Compliance at the General Purpose F inanc ia 1 S tat emen t Leve 1 The Honorable Members of City Council City of Carlsbad, California: We have audited the general purpose financial statements of the Cit: Carlsbad, California (the City) as of and for the year ended June 30, 1 and have issued our report thereon dated October 8, 1991. We conducted our audit in accordance with generally accepted audj standards and Government Auditing Standards, issued by the Comptroller Ger of the United States. Those standards require that we plan and perforrr audit to obtain reasonable assurance about whether the general pur 0 financial statements are free of material misstatement. e Compliance with laws, regulations, contracts, and grants applicable to City is the responsibility of the City's management. As part of obtai reasonable assurance about whether the general purpose financial staten are free of material misstatement, we performed tests of the City's compli with certain provisions of laws, regulations, contracts, and grants. Howe our objective was not to provide an opinion on overall compliance with provisions. Accordingly, we do not express such an opinion. The results of our tests indicate that, with respect to the items tested, City complied, in all material respects, with the provisions referred tc the preceding paragraph. With respect to items not tested, nothing came our attention that caused us to believe that the City had not complied, in material respects, with those provisions. This report is intended for the information of members of City Coun management of the City and the Controller of the State of California, restriction is not intended to limit the distribution of this report, whicl a matter of public record. 0 e e KPrllG pad). i&&L e October 8, 1991 - ~ ~~ _____ e 6 Member Firm of - - ~- - - _ - Klynveid Peat Marwck Goerdeler yupvuj 1- wcvy +=dd PlaAtJAl] ,o tu,, ’equJaw -_ - i-- - L 1661 ‘8 laqo330 -pioaai 3TTqnd 30 iaqqew e SF W,I~M ‘qiodai sqq 30 uorJnqTi3s;p aq3 3p1;~ 03 papuaqur 3ou ST uo?qa;iqsai s?q~ *erui03~p3 30 aqeqs aqq 30 ialloiquo3 aq~ pue d3~3 aqq 30 quaura%suem -1 Vd 9WdX ‘T’F~u~o~ 6~ 30 siaqwau 30 uopu~o3ur ay~ 103 papualu? SI 3iodax ST~L ‘sqs03 pauo;Asanb Pue S%UTPUTJ JO aInpaq3s %uptueduoxe aq3 us: paqrnsap ST q3-pp csquauairnbai asoyq qq-p aDueTTduo3uou 30 aaueqsu: 1eTJaqeunrr; ue pasoI3sTp sainpaaoid Ino 30 sqTnsai aqq ‘iaAaMoH -squawaqnbai asoqq qr)?~ ‘sqmdsai TeTiaqew TIE U? ‘PvP~o~ qou P~Y dq13 ayq vw ahqaq 07 sn pasnm pqq uo-rquaqqs .mo 03 am3 %yq?ou ‘paasaa aou suraa: 02 23,adsai 93~~ -7ioda;r s?ya 30 qdei%eied puoms aq2 ur paqsT1 sr)uauraqnbai aqq qqp~ a3ueTiduromou 30 sa3ueqsuy p?iaqetu ou paso13s~p sainpa3osd asoqr) 30 sqgnsai aqq ‘paqsaq smar)r aqq oq qaadsai ~JTM *uoyuydo ue yms ssazdxa qou op alrl c6~2!~?p~~33~ *qdei%eied Suypaaaid ayq UT paqs?~ squauraqnbaJ aqrl qap aauerTduo3 s,d~?3 aqq uo uoTuTdo u-e 30 uorssaidxa aq~ ST I~T~M 30 aaTq3aFqo aqq ‘qrpne ue ueqq ado3s UT ssaT d1Tepuer)sqns aiaw sampaaoid in0 *squaunuanog 1~301 pue aqeqs 30 sqTpnv a-yaug io3 r)uaua~acing a3ue?~duro3 s,qa%png pue quaura%eue~ 30 a3-tj30 aq? UT paqTi3sap sainpa3oid aTqmT1dde aqq 03 paq?unT aiaM saxnpaaoid in0 saTdr3u-pd qso3/sqsoa aTq-efioTTV sqzodai 1epmu~j Teiapad . q3v a3e1dyiOM aaq-%nia . qq uo3-eg spma . quaua%suem qs~3 . s3qm TTAT3 0 LYp??= pTl?pd 0 :T661 ‘OE aunr papua leab aqq 103 ‘a3uE3s~SSE pr3ueu~~ leiapaj 30 aTnpaq3s aqq UT pag~quap~ ST L~T~M curei20id aaueqs$sse p3~3ueu~3 pxapa3 ~OFOUI sq~ OJ aTqxn1dd-e squamaqnbai %ur~0-[103 aqq ~JTM a3uqIdtuoD s1da)-3 aqq 2saq oq sainpaaoid paT1dd-e osp aneq a~ ‘1661 (8 iaqoq30 pa3ep uoaiaqq qiodai mo panss; aheq pue ‘1661 co~ aunr papua nab aqq x03 pue 30 se ‘(bq53 aqq) e?u103~1e3 ‘peqsTie3 30 d3r3 aq3 30 squawaqeqs ~e?3ueu?3 asodind piaua% aq3 pa3rpne amy GJM :e;UiO3?1E3 ‘pEqSTiE3 JO 6JT3 1~3uno3 63~3 30 siaquIatJ aTqexouoH aq, squamaqnDa8 Teiaua3 Y~TM aauer~amo3 uo 3iodax ,sio?~pnv JuapuadapuI toiz6 v3 ‘o6ala ues laa~is a O~L siueiunomv qqnd pa141ua3 Y3!MJew Wd w&y I -_____I .r Peat Marwick Certified Public Accountants 750 B Street San Diego, CA 92101 e Independent Auditors' Report on Compliance with Specific Major and Nonmajor Prozram Reuuirements The Honorable Members of City Council r) City of Carlsbad, California: We have audited the general purpose financial statements of the City Carlsbad, California (the City), as of and for the year ended June 30, 1: and have issued our report thereon dated October 8, 1991. We have also audited the City's compliance with the requirements goverr types of services allowed or unallowed; eligibility; reporting; special tt and provisions as identified in the attachment; and claims for advances reimbursements that are applicable to its major federal financial assist: program, which is identified in the accompanying schedule of federal financ * assistance, for the year ended June 30, 1991. The management of the Citj responsible for the City's compliance with those requirements. responsibility is to express an opinion on compliance with those requireme based on our audit. We conducted our audit in accordance with generally accepted audit standards and Government Auditing Standard&, issued by the Comptroller Gene of the United States, and Office of Management and Budget (OMB) Circu A-128, Audits of State and Local Governments. Those standards and Circular A-128 require that we plan and perform the audit to obtain reasona assurance about whether material noncompliance with the requirements refer to above occurred. An audit includes examining, on a test basis, evide about the City's compliance with those requirements. We believe that audit provides a reasonable basis for our opinion. In our opinion, the City of Carlsbad, California, complied, in all mater respects, with the requirements governing types of services allowed unallowed; eligibility; reporting; special tests and provisions as identif applicable to its major federal financial assistance program for the y ended June 30, 1991. I) 0 e in the attachment; and claims for advances and reimbursements that 3 e 8 Member Firm of - -__ - Klynveld Peat Marwck Goerdeler e In connection with our audit of the 1991 general purpose financial statemc of the City and with our study and evaluation of the City's internal con by OMB Circular A-128, we selected certain transactions applicable to cer nonmajor federal financial assistance 'programs for the year ended June systems used to administer federal financial assistance programs, as requ a 1991. As required by OMB Circular A-128, we have performed auditing procedure: test compliance with the requirements governing types of services allowec unallowed and eligibility that are applicable to those transactions. procedures were substantially less in scope than an audit, the objective which is the expression of an opinion on the City's compliance with t requirements. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclose1 material instances of noncompliance with the requirements listed in preceding paragraph. With respect to items not tested, nothing came to attention that caused us to believe that the City had not complied, in material respects, with those requirements. This report is intended for the information of members of City Corn management of the City and the Controller of the State of California. restriction is not intended to limit the distribution of this report, whic a matter of public record. * a e Kf)/r/6 Pd dd October 8, 1991 * 0 a 9 0 Attac CITY OF CARLSBAD Special Tests and Provisions Year ended June 30, 1991 a Program Compliance Requirement 0 Lower Income 0 The Public Housing Agency (PHA) is required to revie Housing contract rent and utility allowances for each uni Assistance assure that they do not exceed certain rent limitation Program 0 The PHA is required to annually adjust contract rent tenant utility allowances, upon request from the o determined necessary by the PHA and HUD. Special adjustments may also be granted to the e * The PHA is required to conduct an initial (and ann thereafter) inspection of units prior to executing housing assistance payment contract to insure that unit meets Housing Quality Standards (applies to exi housing and moderate rehabilitation programs only). a 0 0 e e 10 * * CITY OF CARLSBAD Schedule of Findings and Questioned Costs e Year ended June 30, 1991 PROGRAM: Drw-Free Workplace Act a Finding : The City has not published a policy statement notifying employees that unlawful manufacture, distribution, dispensing, possession or use oj controlled substance is prohibited in the City's workplace. Recommendation: The City should finalize its draft policy statement with regard to Drug-Free Workplace Act. Once the policy statement is finalized, it shoulc published in order to ensure that all employees are notified that compli: is required. a Citv's Response: The City has concluded its meet and confer obligation, as defined by Meyers-Millias-Brown Act, with the Carlsbad City Employees' Association. City is currently finalizing its meet and confer obligation with both Carlsbad Police Officers' Association and the Carlsbad Firefighte Association. At the conclusion of these discussions, the City will publishing the policy and will further conduct training with all employe managers and supervisors in compliance with the Drug-Free Workplace Act. e STATUS OF PRIOR YEAR FINDINGS PROGRAM: Lower Income Housing Assistance Program Findings #I1 and 82 The City has begun to develop a contents checklist within tenant files ensure all required documents are in place and properly reviewed. The file to be reviewed and signed off by Housing Division management after all acti file. e e have been completed to assure all critical up-to-date documents are in a e 11 0 CITY OF CARLSBAD Schedule of Findings and Questioned Costs, Continued Year ended June 30, 1991 e PROGRAM: Hinhwav Research. Planning and Construction Finding/Ouestioned Costs As documented in the 1989-1990 single audit, no claims for reimbursement been submitted by the City. The FHA had rejected all previous claims. legal action was settled during the 1990-1991 fiscal year, all claims 1 e been filed by the City, and amounts have been reimbursed by CALTRANS as June 30, 1991. In its settlement with the City, CALTRANS stated that no findings have beer will be made on the question of contract compliance or project supervis: The State of California has agreed not to audit or otherwise review, at a time in the future, the Highway Research, Planning, and Construction pro] for contract compliance, project supervision, or any other question procedures. Therefore, the conditions disclosed in the Single Audit for year ended June 30, 1990 have been satisfactorily resolved. 9 compliance with the Master Agreement, program supplement, or regulations e e a a e 12 r -~-_-~ a d?! Peat Marwick Certified Public Accountants 750 B Street San Diego CA 92101 e (I, 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 Citi a Carlsbad, California (the City), as of and for the year ended June 30, 1 and have issued our report thereon dated October 8, 1991. We have audited the City's compliance with requirements applicable to major fed financial assistance programs and have issued our report thereon d October 8, 1991. a We conducted our audits in accordance with generally accepted audi standards; Government Auditing Standards, issued by the Comptroller Genera the United States; and Office of Management and Budget (OMB) Circular A- Audits of State and Local Governments. Those standards and OMB Circular A require that we plan and perform the audit to obtain reasonable assur about whether the general purpose financial statements are free of mate 0 misstatement and about whether the City complied with laws and regulati noncompliance with which would be material to a major federal financ assistance program. In planning and performing our audits for the year ended June 30, 1991, considered the City's internal control structure in order to determine auditing procedures for the purpose of expressing our opinions on the Cii general purpose financial statements and on its compliance with requiremf applicable to major programs and not to provide assurance on the intei control structure. This report addresses our consideration of inte: control structure policies and procedures relevant to compliance 1 requirements applicable to federal financial assistance programs. We 1 addressed policies and procedures relevant to our audit of the general pur] financial statements in a separate report dated October 8, 1991. The management of the City is responsible for establishing and maintaining internal control structure. In fulfilling this responsibility, estimates judgments by management are required to assess the expected benefits * 0 __~ 0 13 Member F rm of ___~ __ --~ Klynveld Peat MawIck Goerdeler 0 e related costs of internal control structure policies and procedures. objectives of an internal control structure are to provide management v reasonable, but not absolute, assurance that assets are safeguarded agaj loss from unauthorized use or disposition, that transactions are executed accordance with management's authorization and recorded properly to permit e preparation of general purpose financial statements in accordance v generally accepted accounting principles, and that federal financ assistance programs are managed in compliance with applicable laws regulations. Because of inherent limitations in any internal con structure, errors, irregularities, or instances of noncompliance nevertheless occur and not be detected. Also, projection of any evaluatioi e the structure to future periods is subject to the risk that procedures become inadequate because of changes in conditions or that the effective of the design and operation of policies and procedures may deteriorate. For the purpose of this report, we have classified the significant inte control structure policies and procedures used in administering fed financial assistance programs in the following categories: e Accounting Controls Purchases/disbursements External financial reporting a Administrative Controls General requirements: Political activity Cash management Davis Bacon Act Federal financial reports Allowable costs/cost principles Drug-Free Workplace Act Svecific requirements: Types of services Eligibility Reporting 0 Civil rights a 0 Special requirements, if any For all of the internal control structure categories listed above, we obt an understanding of the design of relevant policies and procedures risk. determined whether they have been placed in operation, and we assessed co 0 e 14 0 0 During the year ended June 30, 1991, the City expended 71 percent of its ti federal financial assistance under major federal financial assistance progri We performed tests of controls, as required by OMB Circular A-128, to eval the effectiveness of the design and operation of internal control struc material noncompliance with specific requirements, general requireme requirements governing claims for advances and reimbursements, and am0 claimed or used for matching that are applicable to the City's major fed financial assistance program, which is identified in the accompanying sche of federal financial assistance. Our procedures were less in scope than w be necessary to render an opinion on these internal control structure poli and procedures. Accordingly, we do not express such an opinion. Our consideration of the internal control structure would not necessi disclose all matters in the internal control structure that might be mat< weaknesses under standards established by the American Institute of Certi e Public Accountants. A material weakness is a reportable condition in I the design or operation of one or more of the internal control struc elements does not reduce to a relatively low level the risk that noncompl: with laws and regulations that would be material in relation to a fec financial assistance program may occur and not be detected within a t: period by employees in the normal course of performing their ass: a functions. We noted no matters involving the internal control structure its operations that we considered to be material weaknesses as defined ab0 We also noted other matters involving the internal control structure ant operation that we have reported to the management of the City of Carl California in a separate letter dated October 8, 1991. This report is intended for the information of members of the City Cou management of the City, and the Controller of the State of California. restriction is not intended to limit the distribution of this report, whi a matter of public record. e policies and procedures that we considered relevant to preventing or detec e Km?G ?d r&wcLk e October 8, 1991 0 0 0 15 - --17- __ e KP!&l Peat Marwick Certified Public Accountants 750 B Street San Diego, CA 92101 e a Independent Auditors' Report on Internal Controls at the General Purpose Financial Statement Level e The Honorable Members of City Council City of Carlsbad, California: We have audited the general purpose financial statements of the Cit] Carlsbad, California (the City), as of and for the year ended June 30, 1 e and have- issued our report thereon dated October 8, 1991. We conducted our audit in accordance with generally accepted audi standards and Government Auditing Standards, issued by the Comptroller Gen of the United States. Those standards require that we plan and perform 9 audit to obtain reasonable assurance about whether the general pur financial statements are free of material misstatement. In planning and performing our audit of the general purpose finan statements of the City for the year ended June 30, 1991, we considered internal control structure in order to determine our auditing procedures the purpose of expressing our opinion on the general purpose finanl statements and not to provide assurance on the internal control structure. The management of the City is responsible for establishing and maintainini internal control structure. In fulfilling this responsibility, estimates judgments by management are required to assess the expected benefits related costs of internal control structure policies and procedures. objectives Of an internal control structure are to provide management 1 reasonable, but not absolute, assurance that assets are safeguarded agaj loss from unauthorized use or disposition, and that transactions are exec1 in accordance with management's authorization and recorded properly to pel generally accepted accounting principles. Because of inherent limitations any internal control structure, errors or irregularities may neverthel occur and not be detected. Also, projection of any evaluation of structure to future periods is subject to the risk that procedures may be( inadequate because of changes in conditions or that the effectiveness of design and operation of policies and procedures may deteriorate. a 3 - the preparation of general purpose financial statements in accordance F I - I - - - _-_- - - I 16 Member Firm of - .______._ Klynveld Pea1 Mawick Goerdeler a e For the purpose of this report, we have classified the significant inter control structure policies and procedures in the following categories: Accounting Controls e * Investments Revenue/receipts Purchases/disbursements External financial reporting Controls Used in Administering Federal Programs 0 General reauirements: * Political activity * Civil rights @ Cash management e Davis Bacon Act Federal financial reports Allowable costs/cost principles Drug-Free Workplace Act Specific reauirements: Types of services * Eligibility Reporting * Special requirements, if any e a Our consideration of the internal control structure included all of control categories listed above except that we did not evaluate the inte believed the audit could be performed more efficiently by expan substantive testing rather than placing reliance on the internal con structure and because these categories are not significant to the n federal financial assistance program. The purpose of our consideration of internal control structure was to determine the nature, timing, and exten the auditing procedures necessary for expressing an opinion on the ger purpose financial statements. Our consideration of the internal control structure would not necessi disclose all matters in the internal control structure that might be mate weaknesses under standards established by the American Institute of Certi Public Accountants. A material weakness is a condition in which the desig operation of one or more of the specific internal control structure eler does not reduce to a relatively low level the risk that error2 irregularities in amounts that would be material in relation to the ger a purpose financial statements being audited may occur and not be detc within a timely period by employees in the normal course of performing 1 structure and its operation that we consider to be material weaknesse defined above. control structure over investments or the revenue/receipts cycle becausc a 0 assigned functions. We noted no matters involving the internal COI e 17 e 0 However, we noted certain matters involving the internal control structure its operation that we have reported to the management of the City j separate letter dated October 8, 1991. This report is intended for the information of members of City Coun management of the City, and the Controller of the State of California. restriction is not intended to limit the distribution of this report, whic a matter of public record. 0 e KBlnG Pe0;t dd October 8, 1991 0 0 e a 0 * 18 a