HomeMy WebLinkAboutAzusa Single Audit Report Fiscal Year 2013-2014_201503310952206730
CITY OF AZUSA, CALIFORNIA
SINGLE AUDIT REPORT
JUNE 30, 2014
CITY OF AZUSA, CALIFORNIA
SINGLE AUDIT REPORT
JUNE 30, 2014
CITY OF AZUSA
JUNE 30, 2014
TABLE OF CONTENTS
Page
Number
Independent Auditors’ Report on Internal Control Over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial Statements Performed
in Accordance with Government Auditing Standards ...................................................................... 1
Independent Auditors’ Report on Compliance for Each Major Program and on Internal
Control Over Compliance; and Report on Schedule of Expenditures of Federal
Awards Required by OMB Circular A-133 ........................................................................................... 3
Schedule of Expenditures of Federal Awards for the
Fiscal Year Ended June 30, 2014 ........................................................................................................ 5
Notes to the Schedule of Expenditures of Federal Awards .................................................................... 6
Schedule of Findings and Questioned Costs for the
Fiscal Year Ended June 30, 2014 ........................................................................................................ 7
Schedule of Prior Year Findings and Questioned Costs for the
Fiscal Year Ended June 30, 2013 ...................................................................................................... 11
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the City Council
City of Azusa, California
We have audited, in accordance with the 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, the financial statements of the governmental
activities, the business-type activities, each major fund, and the aggregate remaining fund information of
City of Azusa, California, (the City) as of and for the year ended June 30, 2014, and the related notes to
the financial statements, which collectively comprise the City’s basic financial statements, and have
issued our report thereon dated January 28, 2015.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control
over financial reporting (internal control) to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinions on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do
not express an opinion on the effectiveness of the City’s internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph
and was not designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were
not identified. However, we identified a deficiency in internal control that we consider to be a material
weakness.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control such that there is a reasonable possibility that a material
misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a
timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control
that is less severe than a material weakness, yet important enough to merit attention by those charged
with governance. As described in the accompanying schedule of findings and questioned costs, we
identified certain deficiencies in internal control that we consider to be a material weakness. We consider
the deficiencies described in the accompanying schedule of findings and questioned costs as items
2014-001 and 2014-002 to be material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on
the determination of financial statement amounts. However, providing an opinion on compliance with
To the Honorable Mayor and Members of the City Council
City of Azusa, California
those provisions was not an objective of our audit, and accordingly, we do not express such an opinion.
The results of our tests disclosed instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards. Refer to findings 2014-003 and 2014-004.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal
control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the City’s internal control and compliance. Accordingly,
this communication is not suitable for any other purpose.
Brea, California
March 26, 2015
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INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND
ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON SCHEDULE OF EXPENDITURES
OF FEDERAL AWARDS REQUIRED BY OMB CIRCULAR A-133
To the Honorable Mayor and Members of the City Council
City of Azusa, California
Report on Compliance for Each Major Federal Program
We have audited the City of Azusa’s (the City) compliance with the types of compliance requirements
described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect
on each of the City’s major federal programs for the year ended June 30, 2014. The City’s major federal
programs are identified in the summary of auditor’s results section of the accompanying schedule of
findings and questioned costs.
Management’s Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and
grants applicable to its federal programs.
Auditors’ Responsibility
Our responsibility is to express an opinion on compliance for each of the City’s major federal programs
based on our audit of the types of compliance requirements referred to above. We conducted our audit of
compliance in accordance with auditing standards generally accepted in the United States of America; 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 on compliance for each major
federal program. However, our audit does not provide a legal determination of the City’s compliance.
Opinion on Each Major Federal Program
In our opinion, the City complied, in all material respects, with the types of compliance requirements
referred to above that could have a direct and material effect on each of its major federal programs for the
year ended June 30, 2014.
Report on Internal Control over Compliance
Management of the City of Azusa, California is responsible for establishing and maintaining effective
internal control over compliance with the types of compliance requirements referred to above. In planning
and performing our audit of compliance, we considered the City’s internal control over compliance with
the types of requirements that could have a direct and material effect on each major federal program to
determine the auditing procedures that are appropriate in the circumstances for the purpose of
To the Honorable Mayor and Members of the City Council
City of Azusa, California
expressing an opinion on compliance for each major federal program and to test and report on internal
control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an
opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an
opinion on the effectiveness of the City’s internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a
federal program on a timely basis. A material weakness in internal control over compliance is a
deficiency, or combination of deficiencies, in internal control over compliance, such that there is a
reasonable possibility that material noncompliance with a type of compliance requirement of a federal
program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in
internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over
compliance with a type of compliance requirement of a federal program that is less severe than a material
weakness in internal control over compliance, yet important enough to merit attention by those charged
with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control over
compliance that might be material weaknesses or significant deficiencies. We did not identify any
deficiencies in internal control over compliance that we consider to be material weaknesses. However,
material weaknesses may exist that have not been identified.
Report on the Schedule of Expenditures of Federal Awards Required by OMB Circular A-133
We have audited the financial statements of the governmental activities, the business-type activities, each
major fund, and the aggregate remaining fund information of the City of Azusa, California, as of and for
the year ended June 30, 2014, and the related notes to the financial statements, which collectively
comprise the City’s basic financial statements. We issued our report thereon dated January 28, 2015,
which contained an unmodified opinion on those financial statements. Our audit was conducted for the
purpose of forming opinions on the financial statements that collectively comprise the basic financial
statements. The accompanying schedule of expenditures of federal awards is presented for the purposes
of additional analysis as required by OMB Circular A-133 and is not a required part of the basic financial
statements.
Such information is the responsibility of management and was derived from and relates directly to the
underlying accounting and other records used to prepare the basic financial statements. The information
has been subjected to the auditing procedures applied in the audit of the financial statements and certain
additional procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic financial
statements themselves, and other additional procedures in accordance with auditing standards generally
accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards
is fairly stated in all material respects in relation to the basic financial statements as a whole.
The purpose of this report on internal control over compliance is solely to describe the scope of our
testing of internal control over compliance and the results of that testing based on the requirements of
OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.
Brea, California
March 26, 2015 (except for the schedule of Expenditures of Federal Awards which is as of
January 28, 2015)
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CITY OF AZUSA
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
Federal Pass-Through
CFDA Grantor's
Federal Grantor/Pass-Through Grantor/Program Title Number Number Expenditures
U.S. Department of Housing and Urban Development
Pass through from the County of Los Angeles:
Community Development Block Grant 14.218 Contract# 70713 345,169$
Total U.S. Department of Housing
and Urban Development 345,169
U.S. Department of Justice
Direct Program:
Bureau of Justice Assistance:
Federal Asset Seizure*16.922 CA0190500 442,726
Passed through the City of Los Angeles:
ARRA - Edward Byrnes Memorial Justice Assistance Grant 16.804 2013-DJ-BX-1078 18,017
Total U.S. Department of Justice 460,743
U.S. Department of Transportation
Passed through the State of California:
Department of Transportation:
Highway Planning and Construction *20.205 SRTSLNI-5112(015)167,204
HPLUL-5112(013)583,137
SRTSLNI-5112(016)9,450
Passed through the State of California:
Office of Traffic Safety:
Sobriety Checkpoint 20.600 SC14 026 6,969
PT1449 14,643
SC13 026 4,572
Total U.S. Department of Transportation 785,975
Institute of Museum and Library Services
Passed through the State of California:
Grassroots ESL 45.310 34,958
Total Institute of Museum and Library Services 34,958
U.S. Department of Health and Human Services
Passed through the County of Los Angeles:
Administration for Community Living
Special Programs for the Aging Title III Part C Nutrition Services 93.045 AAA-ENP2-0809-001 142,919
Total U.S. Department of Health and Human Services 142,919
U.S. Department of Homeland Security
Passed through the County of Los Angeles:
Homeland Security Grant Program 97.067 125,000
Total U.S. Department of Homeland Security 125,000
Total Federal Expenditures 1,894,764$
*Major Program
Note A:Refer to Note 1 to the schedule of expenditures of federal awards for a description of
significant accounting policies used in preparing this schedule.
Note B:There was no federal awards expended in the form of noncash assistance and insurance in effect
during the year.
Note C:Total amount provided to subrecipients during the year was $19,996.
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CITY OF AZUSA
NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE YEAR ENDED JUNE 30, 2014
Note 1: Summary of Significant Accounting Policies Applicable to the Schedule of Expenditures of
Federal Awards
a. Scope of Presentation
The accompanying schedule presents only the expenditures incurred by the City of Azusa,
California, that are reimbursable under federal programs of federal financial assistance. For
the purposes of this schedule, federal awards include both federal financial assistance
received directly from a federal agency, as well as federal funds received indirectly by the
City from a non-federal agency or other organization. Only the portion of program
expenditures reimbursable with such federal funds is reported in the accompanying schedule.
Program expenditures in excess of the maximum federal reimbursement authorized or the
portion of the program expenditures that were funded with state, local or other non-federal
funds are excluded from the accompanying schedule.
b. Basis of Accounting
The expenditures included in the accompanying schedule were reported on the modified
accrual basis of accounting. Under the modified accrual basis of accounting, expenditures are
incurred when the City becomes obligated for payment as a result of the receipt of the related
goods and services. Expenditures reported included any property or equipment acquisitions
incurred under the federal program.
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CITY OF AZUSA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
SECTION I - SUMMARY OF AUDITORS' RESULTS
Financial Statements
Type of auditors' report issued: Unmodified Opinion
Internal control over financial reporting:
Significant deficiencies identified? yes X no
Material weaknesses identified? X yes none reported
Noncompliance material to financial
statements noted? yes X no
Federal Awards
Internal control over major programs:
Significant deficiencies identified? yes X no
Material weaknesses identified? yes X none reported
Type of auditors' report issued on compliance for major programs: Unmodified Opinion
Any audit findings disclosed that are required to be
reported in accordance with Section 510(a) of
Circular A-133? X yes no
Identification of major programs:
CFDA Number(s) Name of Federal Program or Cluster
16.922 Federal Asset Seizure
20.205 Highway Planning and Construction
Dollar threshold used to distinguish
between type A and type B program $300,000
Auditee qualified as low-risk auditee? X yes no
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CITY OF AZUSA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
SECTION II - FINANCIAL STATEMENT FINDINGS
Finding Number 2014-001: Excessive Post Audit Entries
In the prior year it was brought to your attention that many account balances required extensive
reconciliation to finalize financial information. During our audit in the current year this weakness still
existed. In performing our audit procedures, there were adjusting entries recorded by the auditing
staff to report account balances accurately. Material journal entries were recommended and
adjustments were made relating to capitalized construction projects, insurance liability, restatements,
and debt in the Successor Agency. We recommend quarterly and annually reconciliations of complex
accounting areas, such as capital assets, insurance reserves and debt reporting to the supporting
documentation and general ledger prior to the audit.
Management’s Response:
Reassignment of duties and responsibilities have been revised to provide efficiency. Management will
continue to closely monitor that entries are recorded timely.
Finding Number 2014-002: Cash and Investments
In the prior year it was brought to your attention that cash required extensive reconciliation to finalize
financial information. During our audit in the current year, this weakness still existed. During our test
work it was noted that the City’s cash and investment were not properly balanced to the general
ledger in a timely manner. The design of internal control should be improved upon to include a
formalized procedure to properly balance and reconcile all of the City’s cash and investments as
reported in the City’s financial statements.
Management’s Response:
Internal control procedures are in the process of being developed formally which should contribute to
timely reconciliations. In addition, we have new staff who are being trained to assist in the
reconciliations.
SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Finding Reference Number: 2014-003
Federal Program Title: Equitable Sharing Program
Federal Catalog Number: 16.922
Federal Agency: U.S. Department of Justice
Pass-Through Entity: N/A
Federal Award Number and Year: CA0190500; 2013
Name of Department: Police Department
Category of Finding: Equipment and Real Property Management
Criteria
The March 2014 Office of Management and Budget (OMB) Circular A-133 Compliance Supplement requires
that physical inventory be taken of property and equipment acquired under Federal awards at least every two
(2) years. Equipment obtained under federal awards are required to be added to the property records of the
recipient including the following information: description, source, who holds title, acquisition date and cost,
percentage of federal participation in the cost, location, condition, disposition data, the date of disposal, and
method used to determine current fair market value.
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CITY OF AZUSA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
Condition
Instance of Non-Compliance - The Police Department is required to take physical inventory of federal award
purchases and ensure any differences between physical inventory and equipment records are resolved.
No physical inventory has been taken for equipment purchases of federal asset seizure funds.
Effect
Failure to not take physical inventory of property and equipment obtained under federal awards can result in
federal agency disallowing equipment purchases and noncompliance with agreement. Not properly including
all purchased and donated equipment and real property including all the required information in the property
records can result in the noncompliance with federal regulations regarding federal property and equipment.
Questioned Costs
We identified no questioned costs in our tests of compliance with this requirement.
Context
As a result of our testwork, it was noted that no physical inventory has taken place for equipment purchases of
federal asset seizure funds.
Recommendation
We recommend that the Police Department adhere to equipment and real property management policies
and procedures set by Department of Justice and take physical inventory of assets every 2 years.
Management Response and Corrective Action
1. Person responsible: Ericka Ceccia, Administrative Analyst; Police Department
2. Corrective action plan: Physical Inventory purchased with Federal Asset Seizure Funds will be
conducted every 2 years.
3. Anticipated implementation date: March 25, 2015 (Immediately after learning that it was most likely
required by DOJ; We began taking Physical Inventory) Confirmed by DOJ 3/27/15
Finding Reference Number: 2014-004
Federal Program Title: Equitable Sharing Program
Federal Catalog Number: 16.922
Federal Agency: U.S. Department of Justice
Pass-Through Entity: N/A
Federal Award Number and Year: CA0190500; 2013
Name of Department: Police Department
Category of Finding: Reporting
Criteria
The Equitable Sharing Agreement between the City of Azusa and U.S. Department of Justice states that the
Equitable Sharing Certification report “must be submitted to aca.submit@usdoj.gov within 60 days of the end
of the [City’s] fiscal year. This Document must be submitted electronically with the Affidavit/Signature
submitted by fax. This will constitute submission to the Department of Justice and the Department of
Treasury.”
Condition
Instance of Non-Compliance - The Police Department is required to submit the Equitable Sharing Certification
report within 60 days after the City’s fiscal year end. During our review, it was noted that the Equitable Sharing
Certification report was submitted after 60 days of the fiscal year end June 30, 2014. The report was submitted
December 22, 2014, 115 days after the deadline.
Effect
Failure to submit the Equitable Sharing Certification report within 60 days of fiscal year end can result in
federal agency disallowing participation and funds and/or noncompliance with agreement.
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CITY OF AZUSA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
Questioned Costs
We identified no questioned costs in our tests of compliance with this requirement.
Context
The City of Azusa’s Police Department failed to submit the Equitable Sharing Certification report timely within
60 days of year end as stipulated in the grant agreement.
Recommendation
We recommend that the Police Department adhere to grant agreement reporting submission deadline set by
Department of Justice and submit the Equitable Sharing Certification report timely within 60 days after year
end.
Management Response and Corrective Action
1. Person responsible: Ericka Ceccia, Administrative Analyst; Police Department
2. Corrective action plan: Future Reports to be submitted within 60 days of fiscal year end date or written
proof of additional time granted by DOJ staff to submit report (per "Guide to Equitable Sharing" pg. 29)
(Unfortunately, additional time to comply was granted verbally for fiscal year end 2014, but no proof
could be provided)
3. Anticipated implementation date: March 25, 2015
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CITY OF AZUSA
SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
SECTION II - FINANCIAL STATEMENT FINDINGS
Finding Number 2013-001: Excessive Post Audit Entries
In the prior year it was brought to your attention that many account balances required extensive
reconciliation to finalize financial information. During our audit in the current year this weakness still
existed. The City proposed a large amount of entries that needed to be posted by LSL which has
caused significant delays in producing the financial statements. This lack of planning and preparation
in future years will continue to cause delays in the timeliness of financial statement drafts being
available. We suggest that this situation be corrected as soon as possible, and that all accounts be
properly reconciled and all entries prepared prior to our arrival for field work.
Management’s Response:
Management will closely monitor that entries are recorded timely prior to the commencement of the
annual audit. Staff has been instructed and reassigned responsibilities to ensure that their funds’
financial statements are completed on time.
Finding Number 2013-002: Cash and Investments
During our testwork it was noted that the City’s cash and investment were not properly balanced to
the general ledger in a timely manner. The design of internal control should be improved upon to
include a formalized procedure to properly balance and reconcile all of the City’s cash and
investments as reported in the City’s financial statements.
Management’s Response:
The department lost a staff member to retirement whose main responsibility was to balance our cash
and investment accounts. This caused remaining staff to pick up the responsibility. Currently, there
are two employees who are now aware of the process of the reconciliation and will ensure that it is
completed prior to the audit commencing.
Finding Number 2013-003: Accounting for Grants
During our audit procedures, we reviewed the Schedule of Federal Expenditures and Awards, as well
as the Schedule of Non Federal Expenditures and Awards prepared by management and noted that it
did not properly record the activity related to all grants. The City neglected to include neither deferred
revenue for monies spent but not yet reimbursed, nor unearned revenue for monies received but not
yet earned. Adjusting entries were made by LSL to eradicate these issues.
Management’s Response:
Management and staff will ensure that the activities are recorded appropriately.
Finding Number 2013-004: Due To and From Other Funds
It is noted that the due to and from other funds between the General Fund and the Water Fund has
crossed into multiple years and continues to increase. The due to and from other funds is used as
short-term (less than one year) borrowing between funds. Since these borrowings are required over
multiple years, we recommend a formal advance (long-term loan agreement) be entered into between
the General Fund and the Water Fund. We also recommend a formal fiscal policy to be implemented
to assess the future financial cashflow of the General Fund, which would identify when these loan
agreements need to be entered into in advance.
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CITY OF AZUSA
SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
Management’s Response:
A loan agreement will be entered should the need arise next year and a formal fiscal policy will be
created and implemented to provide a system of assessment of the financial status of the General
Fund.
SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.
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