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HomeMy WebLinkAbout2001 09 30 Single Audit Report - City of freindswood CITY OF FRIENDSWOOD, TEXAS FEDERAL SINGLE AUDIT REPORT Year Ended September 30,2001 _r' CITY OF FRIENDSWOOD,TEXAS FEDERAL SINGLE AUDIT REPORT TABLE OF CONTENTS Page Independent Auditors' Report on Schedule of Expenditures of Federal Awards 1 Schedule of Expenditures of Federal Awards 3 Notes on Accounting Policies for Federal Awards 4 Independent Auditors' Report On Compliance and on Internal Control Over { Financial Reporting Based on an Audit of Financial Statements Performed In -` Accordance With Government Auditing Standards 5 Independent Auditors' Report on Compliance with the Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 7 Schedule of Findings and Questioned Costs 9 Status of Prior Findings 11 Corrective Action Plan 12 _1 IlL 11 Greenway Plaza,Suite 1515 Null, arson 402 20th Street Houston,TX 77046 a.M .7�/I ! Galveston,TX 77550 (713)621-1515 CERTIF(EDPUBUCACCDUNTANTS (409)762.8380 Fax:(713)621-1570 PROFESSIONAL CORPORATION Fax:(409)762-1749 Independent Auditors'Report on Schedule of Expenditures of Federal Awards To the Honorable Mayor and Members of City Council City of Friendswood, Texas We have audited the general purpose financial statements of the City of Friendswood, Texas, as of and for the year ended September 30, 2001 and have issued our report thereon dated March 1, 2002. These general purpose financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards and provisions require that we plan and perform the audit to obtain reasonable assurance,about whether the general purpose 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 taken as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the general purpose financial statements of the City. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole. 4t,, ,g0t,t6,501#Re Houston, Texas March 1, 2002 1 CITY OF FRIENDSWOOD,TEXAS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED SEPTEMBER 30,2001 Program Program Federal Grantor/Pass Through CFDA Pass Through or Award Expenditures Grantor/Program Title Number Grantor's Number Amount (A). Federal Emergency Management Agency Passed through Texas Department of Public Safety Division of Emergency Management Public Assistance Program 83.544 * 167-27-648-00 329,630 $ 302,854 Emergency Management Performance Grant 83.552 EMT-2001-GR-0005 31,334 31,334 Mitigation Assistance Program 83.536 EM-HPP-M 2000 5,700 5,700 Total Federal Emergency Management Agency 339,888 U.S.Department of Justice Direct Program LLEBG-FEDERAL- Law Enforcement Block Grant 16.592 LB-BX-2198 10,936 10,936 Passed through the State of Texas Office of the Governer Criminal Justice Division Juvenile Accountability Incentive Block Grant 16.523 JB-99-J20-15336-01 5,975 5,975 CJD GR VA-00-V30- Crime Victim Assistance Program 16.575 14062-02 42,000 42,000 Total U.S.Department of Justice 58,911 U.S.Department of Education Passed Through the State of Texas Office of the Governer Criminal Justice Division School Resource Officer Program 84.186 ED.Fed.84.186 83,623 83,623 Total Federal Awards $ 482,422 * Indicates major program. (A) Only includes federal portion. Matching funds have not been included in this schedule. 3 CITY OF FRIENDSWOOD, TEXAS, NOTES ON ACCOUNTING POLICIES FOR FEDERAL AWARDS YEAR ENDED SEPTEMBER 30,2001 NOTE 1 BASIS OF ACCOUNTING City of Friendswood, Texas accounts for federal funding using the accrual method of accounting. This basis of accounting recognizes revenues in the accounting period in which they are earned and expenses in the accounting period in which the liability is incurred. Equipment purchases for grant purposes are treated as expenses in the schedule of expenditures of federal awards and typically capitalized for financial statement purposes. Federal grant funds are considered to be earned to the extent of expenses made under the provisions of the grant, and, accordingly, when such funds are received, they are recorded as deferred revenues until earned. Generally, unused balances are returned to the grantor at the close of specified project periods. 4 • IlL 11 Greenway Plaza,Suite 1515 Null Larson I 402 20th Street Houston,TX 77046 �1..77vV/ l Galveston,TX 77550 (713)621-1515 CERTIFIED PUBLIC ACCOUNTANTS (409)762.8380 Fax:(713)621-1570 PROFESSIONAL CORPORATION Fax:(409)762-1749 Independent Auditors'Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards r- To the Honorable Mayor and Members of City Council City of Friendswood, Texas We have audited the general purpose financial statements of City of Friendswood, Texas (the "City") as of and for the year ended September 30, 2001, and have issued our report thereon dated March 1, 2002. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion,on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting 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 over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect the City's ability to record,process, summarize, and report financial data consistent with the assertions of management in the financial statements. Reportable conditions are described in the accompanying schedule of findings and questioned f . costs as items 99-2 and 01-1. 5 To the Honorable Mayor and Members of City Council City of Friendswood, Texas March 1, 2002 A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the 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. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we did not consider any of the reportable conditions described above to be a material weaknesses. This report is intended solely for the information and use of the City Council, management, others within the organization and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Houston, Texas411/(4 ,?44,1:seili RC March 1, 2002 4_I 6 IlL 11 Greenway Plaza,Suite 1515 Null Ar 2IirSOf 402 20th Street Houston,TX 77046 L.M .71 I Galveston,TX 77550 (713)621-1515 , CERTIFIEDPIJBUCACCOUNTANTS (409)762.8380 Fax:(713)621-1570 PROFESSIONAL CORPORATION Fax:(409)762-1749 Independent Auditors'Report on Compliance With Requirements Applicable to Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A-133 To the Honorable Mayor and Members of City Council City of Friendswood, Texas Compliance We have audited the compliance of City of Friendswood, Texas with the types of compliance requirements described in the US. Office of Management,and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended September 30, 2001. The City's major federal programs are identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the City's compliance with those requirements. In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended September 30, 2001. Internal Control Over Compliance The management of the City is responsible for establishing and maintaining effective internal } control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the City's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on the internal control over compliance in accordance with OMB Circular A-133. 7 To the Honorable Mayor and Members of City Council City of Friendswood, Texas ' �! March 1, 2002 Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts, and grants that would be material in relation to a major federal program 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 over compliance with the requirements of laws, regulations, i. contracts, and grants applicable to federal programs that we consider to be material weaknesses. This report is intended solely for the information and use of the city council, management, others within the organization and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. "1/7616244.silt/ Houston, Texas March 1, 2002 8 CITY OF FRIENDSWOOD,TEXAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30,2001 4WirC, 22Zt` 4- atu 4. SUMMAR, C) BAUD 0 RS' ® S OL.001, ^ . Type of Report on Financial Statements Unqualified Report on Compliance and on Internal Controls—Financial Statements Findings related to compliance with No items noted. laws and regulations Reportable Conditions noted in relation #99-2, #01-1 ' to internal control over financial statements Material weaknesses noted in relation to None noted internal control over financial statements Report on Compliance and Internal Controls—Major Programs Type of Report on Compliance with Unqualified major programs Findings and questioned costs for None Noted federal awards as defined in section.510(a) OMB Circular A-133 Reportable conditions noted in relation None Noted to internal control over major programs Material weaknesses noted in relation to None Noted internal control over major programs Dollar Threshold Considered Between $300,000 Type A and Type B Federal Programs Low Risk Auditee Statements The Organization was not classified as a low-risk auditee in the context of OMB Circular A-133 Major Federal Program Federal Emergency Management Assistance Public Assistance Program(FEMA) CFDA# 83.554 Pass-through Entity Texas Department of Public Safety Division of Emergency Management 9 CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30,2001 LJ II. I)EI iiq Ili FO TI R1YIAON:c7Kgr� � 5 itaa Reportable Conditions noted in relation to internal control over financial statements Finding 99-2 The City's fixed assets are being maintained on two Maintenance of Fixed Assets separate computer systems. There is no periodic Records reconciliation process between these systems and the amounts recorded on the City's general ledger. Criteria Internal controls should be in place to ensure fixed asset balances reported in the City's financial statements reflect actual fixed assets on hand. Effect The effect of not reconciling these ledgers is the likelihood losses or errors could occur and not be detected by _! employees in the normal course of their duties. Recommendation We recommend city finance personnel: • Develop a plan for updating centralized fixed asset records for the city's departments. • Transfer the fixed assets maintained on the older system onto the integrated financial reporting system. Finding 01-1 City personnel with cash receipt responsibilities are also Segregation of Duties capable of making adjustments to the utility billing accounts receivable system. Criteria Internal controls should be in place that ensures that the duties of asset custody of assets are segregated from the duties of records maintenance. Effect The effect of not segregating these duties these duties is the likelihood losses or errors could occur and not be detected by employees in the normal course of their duties. Recommendation While it is difficult to maintain segregation of duties with a limited number of personnel,.the City could mitigate this risk by requiring a review of utility billing adjustments by someone separate from the utility billing and cash receipt function. is 10 CITY OF FRIENDSWOOD, TEXAS STATUS OF PRIOR FINDINGS YEAR ENDED SEPTEMBER 30,2001 FIN4 C444-4;.GS x `-- e a tors 3 $ -04 .,e 1,.r3:r .r_ .,. .'.,. . . . �, ,.._ .,„• ...__._ GENERAL PURPOSE FINANCIAL STATEMENTS Comment 99-2 Maintenance of Fixed Assets Reportable Conditions Records—see current year schedule of findings and questioned costs. Material Weaknesses None noted. Noncompliance Material To The Financial None noted. Statements FEDERAL PROGRAMS Internal Control Findings -Federal None noted Compliance Findings—Federal No compliance findings material to major federal programs noted. I ' 11 1 CITY OF FRIENDSWOOD,TEXAS CORRECTIVE ACTION PLAN YEAR ENDED SEPTEMBER 30,2001 l ,' CO 4 ORRE 6ACTION�P Finding 99-2 Contact Person: Maintenance of Fixed Assets ; Ms. Cindy Edge Records Response: The assets have been converted to one system. We are currently reconciling the systems. Current assets are added on a weekly basis 1 and will be reconciled to the ledger on a quarterly basis beginning 6/30/02. Estimated Completion Date: The reconciliation will be complete by June 15,2002. The departments will complete an inventory prior to September 30. Finding 01-1 Contact Person: Segregation of Duties Ms. Cindy Edge • I Response: Adjustments to accounts receivable accounts will be approved by one of two accounting assistants who do not normally work in the utility billing division. Adjustments will be reviewed and approved on a daily basis. Estimated Completion Date: This procedure will be implemented 5/1/2002 I ! J 12