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2000 City Compliance ReportsI I I I I 11 I I I I I CITY OF ROSEMEAD COMPLIANCE REPORTS AND OTHER FINANCIAL INFORMATION JUNE 30, 2000 1 . A McGLADREY& PULLEN, LLP To the Honorable Mayor and Members of the City Council City of Rosemead, California RSM international This letter is intended to inform the City Council of the City of Rosemead (the City) about significant matters related to the conduct of the annual audit so that you can appropriately discharge your oversight responsibility, and that we comply with our professional responsibilities. This letter is intended solely for the information and use of the City Council and management. We have provided a separate letter, dated September 8, 2000, concerning internal control conditions and compliance matters that we noted during our audit of the City's financial statements for the year ended June 30, 2000. The Auditor's Responsibility under Generally Accepted Auditing Standards Our audit of the City's financial statements for the year ended June 30, 2000, was conducted in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in 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, rather than absolute, assurance about whether the financial statements are free of material misstatement whether caused by error, fraudulent financial reporting or misappropriation of assets. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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. Accordingly, the audit was designed to obtain reasonable, rather than absolute, assurance about the financial statements. We believe that our audit accomplished that objective. We noted that beginning with the fiscal year ended June 30, 2003, the City will be required to convert their financial statements in accordance with GASB No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. The City will begin addressing this issue soon. GASB No. 34 will eliminate the General Long-term Debt Account Group (GLTDAG), among other changes, and will require the City to reflect debt arising from advances between funds in the respective fund for financial reporting purposes. We noted that as of June 30, 2000, $35,356,610 is currently reflected in the GLTDAG. Other changes include: changes in fiduciary funds, creation of permanent funds, new equity accounts, elimination of contributed capital, single category for transfers, and infrastructure reporting and depreciation accounting. Certified Public Accountants City of Rosemead Page 2 Significant Accounting Policies The City Council and Finance Committee have the ultimate responsibility for the appropriateness of the accounting policies used by the City. The City did not adopt any significant new accounting policies nor have there been any changes in existing significant accounting policies during the current period which should be brought to your attention for approval. Significant or Unusual Transactions We did not identify any significant or unusual transactions or significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Management Judgments and Accounting Estimates Accounting estimates are an integral part of the preparation of financial statements and are based upon management's current judgment. The process used by management encompasses their knowledge and experience about past and current events and certain assumptions about future events. Management has informed us that they used all the relevant facts available to them at the time to make the best judgments about accounting estimates, and we considered this information in the scope of our audit. Significant Audit Adjustments The following is a description of adjustments arising from the audit that could, in our judgment, either individually or in the aggregate, have a significant effect on the entity's financial reporting process: We assisted the City with 22 audit adjustments related primarily to investments, operating transfers, and accounts receivable and payable. We also identified four reclassification adjustments that collectively were considered immaterial and, therefore, not recorded on the City's books but are reflected in the financial statements for reporting purposes In addition, we identified one potential adjustment related to cash that was considered immaterial and, therefore, management decided not to record it in the financial statements. Other Information in Documents Containing Audited Financial Statements We are not aware of any documents, other than the Comprehensive Annual Financial Report, which contain the City's financial statements for the year ended June 30, 2000. We are required to perform certain additional reviews and other procedures under our quality assurance system whenever our reports are included, or we are named as accountants, auditors or "experts," in any document used in any public or private offering of equity or debt securities. Disagreements with Management We had no disagreements with management on financial accounting or reporting matters or over auditing procedures. No major issues were discussed with management relative to our initial or recurring retention and no difficulties have been encountered in dealing with management in the performance of the audit. City of Rosemead Page 3 Consultations with Other Accountants We are not aware that management has consulted with other accountants relative to generally accepted accounting principles or generally accepted auditing standards or Government Auditing Standards. Difficulties Encountered in Performing the Audit We did not encounter any difficulties in dealing with management relating to the performance of the audit. This letter is intended solely for the information and use of management of the City of Rosemead, California. We will be pleased to respond to any questions you may have about the foregoing. Pasadena, California September 8, 2000 I 1 1 I TABLE OF CONTENTS SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS I Notes to schedule of expendituers of federal awards 2 INDEPENDENT AUDITOR'S REPORT ON: Compliance with requirements applicable to the major program and internal control over compliance in accordance with OMB Circular A-133 3 and 4 ' Compliance and on internal control over financial reporting based on an audit of financial statements performed in accordance with Government Auditing Standards 5 and 6 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 7 ' SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS 8 INDEPENDENT ACCOUNTANT'S REPORT ON AGREED-UPON PROCEDURES ' APPLIED TO APPROPRIATIONS LIMIT CALCULATION 9 and 10 Appropriations Limit Calculation I I 1 1 I 1 I 1 I CITY OF ROSEMEAD, CALIFORNIA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2000 Catalog of Federal Pass- Domestic through Entity Program Program Assistance Identifying or Award Expendi- Grantor/Pass-through Grantor Program Title Number Number Amount totes U.S. Department of Housing and Urban Development ' Direct Programs: Community Development Block Grant Entitlement Program I U I 1 I HOME Investment Partnership Program U.S. Department of Justice Passed through County of Los Angeles Sheriffs Department: Community-oriented Policing Services Local Law Enforcement Block Grant Total Expenditures of Federal Awards 14.218 N/A $ 1,507,000 $ 10,511 14.218 N/A 1,517,000 889,496 3,024,000 900,007 14.239 M98-MC-06-0553 467,000 - 14.239 M99-MC-06-0553 503,000 970,000 16.580 P41401 379,375 120,414 16.592 1999LB V X6098 141,635 104,935 521,010 225,349 $ 4,515,010 $ 1 125,356 1 I 1 I CITY OF ROSEMEAD NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS June 30, 2000 Note 1. Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of the City of Rosemead (the City), California, and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the general purpose financial statements. Note 2. Subrecipients Of the federal expenditures presented in the schedule, the City provided federal awards to subrecipients as follows: CFDA Number Program Title Provided 14.218 Community Development Block Grant Entitlement Program Amount Expended $143,696 2 McGLADREY& PULLEN, LL P I I L I Members of the City Council Certified Public Accountants INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO THE MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 To the Honorable Mayor and City of Rosemead Rosemead, California RSM international 1 Compliance 1 Ll LJ 1 I We have audited the compliance of the City of Rosemead (the City), California, with the types of compliance requirements described in U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to its major federal program for the year ended June 30, 2000. The City's major federal program is identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to its major federal program 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 generally accepted auditing standards; 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 toabove thatcould 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 on 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 June 30, 2000. I 0 I Schedule of Expenditures of Federal and State Awards Internal Control over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with 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 internal control over compliance in accordance with OMB Circular A-133. Our consideration of internal control over compliance would not necessarily disclose all matters of 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 internal control over financial reporting and its operation that we consider to be material weaknesses. ' We have audited the general purpose financial statements of the City as of and for the year ended June 30, 2000, and have issued our report thereon dated September 8, 2000. Our audit was performed for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The accompanying schedule of expenditures of federal and state awards is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the general purpose financial statements. 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 stated in all material respects in relation to the general purpose financial statements taken as a whole. ' This report is intended solely for the information and use of the City Council, management and applicable governmental control agencies and is not intended to be and should not be used by anyone other than those specified parties. I ' Pasadena, California September 8, 2000 1 I i 1 4 ' LNQ McGLADREY& PULLEN, LLP D 1 I our audit in accordance with generally accepted auditing standards and the standards applicable to Certified Public Accountants INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER RSM international FINANCIAL REPORTING 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 Rosemead Rosemead, California We have audited the financial statements of the City of Rosemead (the City), California, as of and for the year ended June 30, 2000, and have issued our report thereon dated September 8, 2000. We conducted 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 financial statements and not to provide assurance on internal control over financial reporting. Our consideration of internal control over financial reporting would not necessarily disclose all matters in internal control over financial reporting 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 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. We noted no matters involving internal control ' over financial reporting and its operation that we consider to be material weaknesses. i 1 1 1 This report is intended for the information and use of City Council, management and applicable governmental control agencies. However, this report is a matter of public record and its distribution is not limited. 1 Pasadena, California September 8, 2000 1 1 1 i 1 1 1 1 1 1 1 1 1 1 6 CITY OF ROSEMEAD SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2000 1. Summary of Independent Auditor's Results Financial Statements Type of auditor's report issued: Unqualified Internal control over financial reporting: • Material weakness(es) identified? • Reportable condition(s) identified that are not considered to be material weaknesses? Noncompliance material to financial statements noted? Federal Awards Internal control over major program: • Material weakness(es) identified? • Reportable condition(s) identified that are not considered to be material weakness(es)? Yes X No Yes X None Reported Yes X No Yes X No Yes X None Reported Type of auditor's report issued on compliance for major programs: Unqualified • Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of OMB Circular A-133? Yes X No Identification of major program: CFDA Number Name of Federal Program Amount Expended 14.218 Community Development Block Grant Entitlement Program $900,007 Dollar threshold used to distinguish between type A and type B programs $300,000 Auditee qualified as low-risk auditee? X Yes No II. Findings relating to the financial statement audit as required to be reported in accordance with generally accepted Government Auditing Standards None reported III. Findings and questioned costs for federal awards None reported 7 CITY OF ROSEMEAD I ' SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS Year Ended June 30, 2000 1 I1 1 I There were no prior audit findings reported. I McGLADREY&PULLEN,LLP RSM ® Certified Public Accountants international ' INDEPENDENT ACCOUNTANT'S REPORT ON AGREED-UPON PROCEDURES ' APPLIED TO APPROPRIATIONS LIMIT CALCULATION ' To the Honorable Mayor and Members of the City Council City of Rosemead ' Rosemead, California We have applied the procedures enumerated below to the accompanying Appropriations Limit ' Calculation of the City of Rosemead, California (the City), for the year ended June 30, 2000. These procedures, which were agreed to by the City and the League of California Cities as presented in their Article XIIIB Appropriations Limitation Uniform Guidelines, were performed solely to assist the City in ' meeting the requirements of Section 1.5 of Article XIIIB of the California Constitution. This engagement to apply agreed-upon procedures was performed in accordance with standards ' established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the specified users of the report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report ' has been requested or for any other purpose. The procedures performed and our findings were as follows: ' I. We obtained the completed internal computations and determined that the limit and annual adjustment factors were adopted by a resolution of the City of Rosemead Council, along with the ' annual budget. We also compared the population and inflation options included in the aforementioned calculation to those that were selected by a recorded vote of the City Council. ' Finding: No exceptions were noted as a result of our procedures. 2. For the accompanying Appropriations Limit Calculation, we added line A, last year's limit, to line E, total adjustments, and agreed the resulting amount to line F, this year's limit. Finding: No exceptions were noted as a result of our procedures. ' 3. We agreed the current year information presented in the accompanying Appropriations Limit Calculation to the supporting calculations described in item I above. ' Finding: No exceptions were noted as a result of our procedures. 9 1 4. We compared and agreed the prior year Appropriations Limit presented in the accompanying ' Appropriations Limit Calculation to the prior year Appropriations Limit adopted by the City Council during the prior year. Finding: No exceptions were noted as a result of our procedures. We were not engaged to, and did not, perform an audit, the objective of which would be the expression ' of an opinion on the accompanying Appropriations Limit Calculation of the City of Rosemead, California. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. No procedures have been performed with respect to the determination of the appropriation limit for the base year, as ' defined by the League Publication entitled Article XIIIB Appropriations Limitation Uniform Guidelines. This report is intended solely for the use of the City of Rosemead, California, and should not be used by ' those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures for their purposes. However, this report is a matter of public record and its distribution is not limited. ' Pasadena, California September 8, 2000 1 1 L, I 10 ' 1 1 1 1 1 1 1 1 1 1 CITY OF ROSEMEAD APPROPRIATIONS LIMIT CALCULATION Year Ended June 30, 2000 A. Last Year's Limit B. Adjustment Factors 1. Population change 2. Inflation change Total Adjustment C. Annual Adjustment D. Other Adjustments: Lost responsibility Transfer to private Transfer to fees Assumed responsibility Subtotal E. Total Adjustments F. This Year's Limit Amount Source $ 22,335,983 1.0178 State Finance 1.0453 State Finance .0639 $ 1,427,269 (B x A) 1,427,269 $ 23,763,252