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1995 Audit LettersM LVA. McGLADREY&PULLEN, LLP Certified Public Accountants and Consultants To the Honorable Mayor and Members of the City Council City of Rosemead, California This letter is intended to inform the City Council 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 of the City of Rosemead, California. Our audit of the general purpose financial statements of the City of Rosemead for the year ended June 30. 1995, was conducted in accordance with generally accepted auditing standards and "Government Auditing Standards," issued by the Comptroller General of the United States: and the provisions of the Single Audit Act of 1984, Office of Management and Budget ("OMB") Circular A-128 and OMB's Compliance Supplement titled, "Uniform Requirements for Grants to State and Local Governments." Those standards, circulars, and supplements require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether the City has adhered to specific financial compliance requirements and if the City's internal control structure over financial reporting and/or safeguarding assets is suitably designed and implemented to achieve the control objectives. 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. SIGNIFICANT MATTERS Adoption of a significant accounting policy: Effective July 1, 1994, the City adopted Governmental Accounting Standards Board ("GASB") Statement No. 22, "Accounting for Taxpayer-Assessed Tax Revenues in Governmental Funds," which requires the City to recognize revenues from taxpayer-assessed taxes, such as sales taxes, on a modified accrual basis, when thev become both measurable and available. As a result of the adoption of GASB Statement No. 22, the fund balance of the General Fund has been retroactively restated to recognize the increase in tax revenues resulting from their accrual. This restatement had the effect of increasing the fund balance of the General Fund by $415,248, as compared with the amounts previously reported. Prior period adjustment: The beginning balance in the Capital Projects Fund has been retroactively restated to correct for prior year property tax revenues due to the understatement of total revenues. The effect of this restatement was to increase fund balance by $219,565 from the amounts previously reported. Accounting estimates: We noted no area where it was necessary for management to form particularly sensitive accounting estimates. Year-end accounting adjustments: The following is a description of adjustments made arising from the audit that could, in our judgment, either individually or in the aggregate, have a significant effect on the entities' financial reporting process: a. An adjustment was made to reclassify a negative cash amount to a liability in the Redevelopment Agency's cash accounts. b. A liability was recorded in an amount of $320,000 for amounts estimated to be due for ineligible Community Development Block Grant projects. C. Additionally, several bookkeeping-type entries were made to facilitate the closing of the City's financial records for the year ending June 30, 1995. Documents which include the citv's financial statements: We are not aware of anv other documents which contain the City's financial statements for the year ended June 30, 1995. 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 recurring retention and no difficulties have been encountered in dealing with management in the performance of the audit. Accounting or auditing consultation: 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. Contingencies: We noted one material contingency associated with the financial statements regarding the potential liability relating to a claim for indemnity received regarding the landfill cleanup and hazardous waste lawsuit. We will be pleased to respond to any questions you may have about the foregoing. We appreciate the opportunity to serve the City of Rosemead and the related component units. San Bernardino, California October 13, 1995 McGLADREY&PULLEN, LLP Certified Public Accountants and Consultants REPORT REQUIRED BY PROPOSITION 111 ON THE CITY'S APPROPRIATIONS LIMIT To the Honorable Mayor and Members of the City Council City of Rosemead, Califomia We have applied the procedures enumerated below to the accompanying Appropriations Limit Calculation of the City of Rosemead, California for the year ended June 30. 1995. These procedures, which were agreed to by the League of Califomia 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 report is jntended for the information of management and the City Council. This restriction is not intended to limit the distribution of this report, which is a matter of public record. The procedures performed and our findings were as follows: I. 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 #I 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. These agreed-upon procedures are substantially less in scope than an audit, the objective of which is the expression of an opinion on the Appropriations Limit Calculation. Accordingly, we do not express such an opinion. Based on the application of the procedures referred to above, nothing came to our attention that caused us to believe that the accompanying Appropriations Limit Calculation was not computed in accordance with Article XIIIB of the California Constitution. Had we performed additional procedures or had we made an audit of the accompanying Appropriations Limit Calculation and the other completed supporting worksheets, matters might have come to our attention which would have been reported to vou. San Bernardino, California October 13, 1995 CITY OF ROSEMEAD, CALIFORNIA APPROPRIATIONS LIMIT CALCULATION Year Ended June 30, 1995 A. Last Year's Limit B. Adjustment Factors 1. Population change 2. Inflation change Total Adjustment percent 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 $ 17,200,156 0.96% (State Finance) 2.72% (State Finance) 3.71% (131*132) 638,126 (B*A) 638,126 (C+D) $ 17,838282 (A+E)'