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1998 Audit LettersMcGLADREY&PULLEN, LLP e Certified Public Accountants and Consultants November 25, 1998 To the Finance Committee City of Rosemead, California RSM international This letter is intended to inform the Finance Committee of the City of Rosemead 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 of Rosemead's Finance Committee and senior management. We have provided separate letters, dated September 18, 1998, concerning the internal control conditions and compliance matters that we noted during our audit of your City's financial statements for the year ended June 30, 1998. Our audit of the financial statements of the City of Rosemead for the year ended June 30, 1998, was conducted in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Govemment Auditing Standards issued by the Comptroller General of the United States and those standards applicable to financial audits contained in OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. 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, or whether the organization has adhered to specific financial compliance requirements. 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 and major program compliance. 1. The following is a description of significant accounting policies or their application which were either initially selected or changed during the year: As of July 1, 1997, the City of Rosemead adopted Govemment Accounting Standards Board (GASB) Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investments Pools. GASB Statement No. 31 requires that investments be reported at their fair value and that all changes in fair value be reflected in income for the period in which they occur. The adoption of this Statement had no material effect on the financial statements for fiscal year ended June 30, 1998. Suite 300 140 South Lake Avenue Pasadena, California 91101-2651 (626) 795-7950 FAX (626) 795-9820 Worldwide Services Through dSM International . City of Rosemead November 25, 1998 Page 2 As of July 1, 1997, the City of Rosemead adopted GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers. This Statement established standards for measurement, recognition and display of pension expense and related liabilities, assets and disclosures in the financial statements of state and local government employers. The adoption of this Statement had no material effect on the financial statements for fiscal year ended June 30, 1998. The City of Rosemead has also adopted GASB Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. This Statement establishes accounting and financial reporting standards for Internal Revenue Code (IRC) Section 457, Deferred Compensation Plans of State and Local Governmental Employers. The effect of this Statement was to eliminate the asset and corresponding liability from the City of Rosemead's books for the year ended June 30, 1998. Also, because the Board was unaware of any additional risks to plan sponsors, under the revised IRC provision, any related financial statement disclosures for the deferred compensation plan have been omitted for the fiscal year ended June 30, 1998. 2. We noted no areas where it was necessary for management to form particularly sensitive accounting estimates in connection with the preparation of the financial statements. 3. In connection with the audit, we assisted the City with 17 audit adjustments related to municipal equity, investments, accounts payable, employee benefits, accounts receivable, and interfund receivables and payables. The City made five audit adjustments to the original trial balances presented to us subsequent to the start of our audit which consisted primarily of entries for cash, accounts receivable, accounts payable, investments, municipal equity, and interfund receivables and payables. 4. In connection with the entity's Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 1998, we did not perform any procedures or corroborate any other information included in the document. However, we read that entity's CAFR and considered whether the information or the manner in which it was presented was materially inconsistent with the information or the manner of presentation of the financial statements. Based on our reading, we concluded that the information did not require revision. 5. 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. We want to thank Ms. Karen Ogawa and her staff for their assistance and cooperation. 6. 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. 7. We noted no material contingencies associated with the financial statements. We will be pleased to respond to any questions you may have about the foregoing. r Pasadena, California ,I McGLADREY&PULLEN,LLP RSM e Certified Public Accountants and Consultants international INDEPENDENT ACCOUNTANT'S REPORT REQUIRED BY PROPOSITION 111 ON THE CITY'S APPROPRIATIONS LIMIT To the Honorable Mayor and Members of the City Council City of Rosemead, California We have performed the procedures enumerated below to the accompanying Appropriations Limit Calculation of the City of Rosemead, California, for the year ended June 30, 1998. These procedures, which were agreed to by the League of California Cities and presented in their Article XIIIB Appropriations Limitation Uniform Guidelines, were performed solely to assist you in meeting the requirements of Section 1.5 of Article XIIIB of the California Constitution. This agreed-upon procedures engagement was performed in accordance with standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is 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: 1. We obtained the completed computations and determined that the limit and annual adjustment factors were adopted by a resolution of the City Council, along with the annual budget. 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. 3. We agreed the current year information presented in the accompanying Appropriations Limit Calculation to the supporting calculations described in 1. above. 4. We agreed the prior year Appropriations Limit presented in the accompanying Appropriations Limit Calculation to the prior year Appropriations Limit which was adopted by the City Council during the prior year. We were not engaged to, and did not, perform an examination, the objective of which would be the expression of an opinion on the accompanying Appropriations Calculation. 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. Suite 300 Worldwide 140 South Lake Avenue Services Pasadena, California 91101-2651 Through (626) 795-7950 FAX (626) 795-9820 RSM International This report is solely for the use of the Mayor and the City Council of the City of Rosemead, California, and the Education Department of the State of 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. i Pasadena, California September 18, 1998 CITY OF ROSEMEAD, CALIFORNIA APPROPRIATIONS LIMIT CALCULATION Year Ended June 30, 1998 Amount Source A. Last year's limit B. Adjustment factors: 1. Population change 2. Inflation change Total adjustment percent C. Annual adjustment D. Other adjustments: 1. Lost responsibility 2. Transfer to private 3. Transfer to fees 4. Assumed responsibility E. Total adjustments F. This year's limit $ 19,997,635 (Prior year limit) 1.05 % State finance 4.67 State finance 5.77 % $ 1,153,864 (B*A) 1,153,864 (C+D) $ 21,151,499 (A+E)