HomeMy WebLinkAbout10/15/2013 10 State Auditor's Reports; 2012 Financial Statements and Federal Single Audit BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No. (
For Meeting of: 10/15/2013
ITEM TITLE: State Auditor's Reports — City's 2012 Financial Statements
and Federal Single Audit.
SUBMITTED BY: Cindy Epperson, Finance & Budget Director
SUMMARY EXPLANATION:
Attached for Council's information is the Washington State Auditor's Office (SAO) report
regarding their examination of the City of Yakima for the period January 1 through December
31, 2012. The Auditor's examination (audit) included three areas of review, as noted below:
1. Financial Reporting, with respect to:
(a) Evaluation of internal controls
(b) Compliance with laws and regulations
2. Federal Regulations, with respect to:
(a) Compliance with laws and regulations
(b) Evaluation of internal controls
3. Financial Statements (and related disclosures and internal controls)
You will notice the language of the reports have changed slightly in response to some recent
standard changes. The term in the past "unqualified" has been replaced by "unmodified ".
Unmodified means a clean opinion just as unqualified did in the past. As stated in the enclosed
auditor's reports, the Auditors gave the City's Financial Statements an Unmodified Opinion (i.e.:
a clean opinion with no qualifications = the highest possible rating). The City has received an
Unqualified or Unmodified Opinion from the State Auditors on our financial statements every
year for more than two decades. The final audit by the SAO for the fiscal year ending
December 31, 2012 is currently in progress; this is an "Accountability" audit; when complete,
this will conclude the auditor's work regarding fiscal year 2012.
Due to the size and complexity of documents included in the audit report, only the auditors
written reports and comments have been included in the Council packet; however the entire
report — including the financial statements themselves and the related footnotes, Management
Discussion and Analysis and supplemental information - may be found on the State Auditor's
website - www.sao.wa.gov /EN/ Audits / Pages /Search /AuditReportSearch.aspx - then enter
"City of Yakima" ; or simply select "Yakima, City of " in the specific government drop down box
towards the bottom of the screen.
(Additionally, the Comprehensive Annual Financial Report (CAFR) is posted on the City's
website. To access the CAFR on-line, go to " www.yakimawagov"; then go to "City
Departments" at the bottom of the page and click on "Finance"; on the right-hand side listed
under "Pages", click on "Financial Reports", and then "2012 Comprehensive Annual Financial
Report". )
Resolution: Ordinance:
Other (Specify): Report - 2012 State Auditor
Contract: Contract Term:
Start Date: End Date:
Item Budgeted: Amount:
Funding Source/Fiscal
Impact:
Strategic Priority: Public Trust and Accountability
Insurance Required? No
Mail to:
Phone:
APPROVED FOR
City Manager
SUBMITTAL:
RECOMMENDATION:
Accept Report
ATTACHMENTS:
Description Upload Date Type
LII 2012 Audit Results Summary 9/27/2013 Cover Memo
2012 Financial & Single Audit Report 9/27/2913 Cover Memo
Audit Results Summary:
1) Financial Reporting (pg. 3 & 4):
(a) Internal Controls: The auditors reviewed the City's internal controls over financial reporting to
the extent the Auditor's considered necessary for the purpose of designing their auditing
procedures for the purpose of expressing their opinion on the financial statements.
The audit states: "... we did not identify any deficiencies in internal controls that we consider to be
material weakness... ".
(b) Compliance: As part of their review to obtain reasonable assurance that the City's financial
statements are free of material misstatements, the State Auditors test for compliance with
certain provisions of laws and regulations, contracts and grant agreements. The auditor
needs to obtain reasonable assurance that compliance with laws, regulations, contracts and
grants has occurred, but they do not express an opinion on overall compliance.
The audit states: "...the results of our tests disclosed no instances of non - compliance or other
matters that are required to be reported under Government Auditing Standards... ".
2) Major (Federal) Program Regulations (pg. 5 - 7):
Compliance: The auditors are required to perform audits to obtain reasonable assurance about
whether any non - compliance with laws, regulations, etc. could have a direct and material effect on
a major federal program.
The audit states: (pq. 6) "...In our opinion, the City complied, in all material respects, with the
compliance requirements ... that could have a direct and material effect on each of its major
federal programs for the year ended December 31, 2012."
Internal Controls over Compliance: The auditors perform procedures to test internal controls
over compliance requirements that could have a direct and material effect on major federal
programs for the purpose of expressing an opinion on compliance (as noted above) and to
test and report on internal control over compliance in accordance with OMB Circular A -133.
The auditors reported "We did not identify any deficiencies in internal control over compliance
that we consider to be material weaknesses."
3) Financial Statements (pg. 9): the State Auditors audited - and expressed an opinion on - the City's
Financial Statements for the period January 1 through December 31, 2012. The auditor's
opinion is not modified with respect to this matter - the highest rating possible.
The auditors stated "...In our opinion, the financial statements... present fairly, in all material
respects, the respective financial position of the governmental activities, the business -type
activities, each major fund, and the aggregate remaining fund information of the City of Yakima,
as of December 31, 2012, and the respective changes in financial position and, where applicable,
cash flows thereof, and the respective budgetary comparisons for the general and community
development fund for the year then ended, in conformity with accounting principles generally
accepted in the United States of America."
Washington State Auditor's Office
Financial Statements and Federal Single Audit Report
City of Yakima
Yakima County
Audit Period
January 1, 2012 through December 31, 2012
Report No. 1010563
°a °''s WASHINGTON
Issue Date
September 27, 2013 t` KELLEY
STATE AUDITOR
r ll T
•
Washington State Auditor
Troy Kelley
September 27, 2013
Mayor and City Council.
City of Yakima
Yakima, Washington
Report on Financial Statements and Federal Single Audit
Please find attached our report on the City of Yakima's financial statements and compliance
with federal laws and regulations.
We are issuing this report in order to provide information on the City's financial condition.
Sincerely,
TROY KELLEY •
STATE AUDITOR
Insurance Building, P.O. Box 40021 • Olympia, Washington 98504 -0021 • (360) 902 -0370 • TDD Relay (800) 833 -6388
Table of Contents
City of Yakima
Yakima County
January 1, 2012 through December 31, 2012
Federal Summary 1
Independent Auditor's 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 3
Independent Auditor's Report on Compliance For Each Major Federal Program and on
Internal Control Over Compliance in Accordance with OMB Circular A -133 5
Independent Auditor's Report on Financial Statements 8
Financial Section 11
Federal Summary
City of Yakima
Yakima County
January 1, 2012 through December 31, 2012
The results of our audit of the City of Yakima are summarized below in accordance with U.S.
Office of Management and Budget Circular A -133.
FINANCIAL STATEMENTS
An unmodified opinion was issued on the financial statements of the governmental activities, the
business -type activities, each major fund and the aggregate remaining fund information.
Internal Control Over Financial Reporting:
• Significant Deficiencies: We reported no deficiencies in the design or operation of
internal control over financial reporting that we consider to be significant deficiencies.
• Material Weaknesses: We identified no deficiencies that we consider to be material
weaknesses.
We noted no instances of noncompliance that were material to the financial statements of the
City.
FEDERAL AWARDS
Internal Control Over Major Programs:
• Significant Deficiencies: We reported no deficiencies in the design or operation of
internal control over major federal programs that we consider to be significant
deficiencies.
• Material Weaknesses: We identified no deficiencies that we consider to be material
weaknesses.
We issued an unmodified opinion on the City's compliance with requirements applicable to each
of its major federal programs.
We reported no findings that are required to be disclosed under section 510(a) of OMB
Circular A -133.
Washington State Auditor's Office
1
Identification of Major Programs:
The following were major programs during the period under audit:
CFDA No. Program Title
14.218 CDBG — Entitlement Grants Cluster - Community Development Block
Grants /Entitlement Grants
14.239 Home Investment Partnerships Program
16.710 Public Safety Partnership and Community Policing Programs
16.710 ARRA - Public Safety Partnership and Community Policing Programs
(Recovery Act)
16.738 Edward Byrne Memorial Justice Assistance Grant
16.804 ARRA - Edward Byrne Memorial Justice Assistance Grant
(Recovery Act)
The dollar threshold used to distinguish between Type A and Type B programs, as prescribed
by OMB Circular A -133, was $300,000.
The City did not qualify as a low -risk auditee under OMB Circular A -133.
Washington State Auditor's Office
2
Independent Auditor's 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
City of Yakima
Yakima County
January 1, 2012 through December 31, 2012
Mayor and City Council
City of Yakima
Yakima, Washington
We have audited, 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, the financial statements of
the governmental activities, the business -type activities, each major fund and the aggregate
remaining fund information of the City of Yakima, Yakima County, Washington, as of and for the
year ended December 31, 2012, and the related notes to the financial statements, which
collectively comprise the City's basic financial statements, and have issued our report thereon
dated September 17, 2013. During the year ended December 31, 2012, the City implemented
Governmental Accounting Standards Board Statement No. 63, Financial Reporting of Deferred
Outflows of Resources, Deferred Inflows of Resources and Net Position.
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.
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 City'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.
Washington State Auditor's Office
3
Our consideration of internal control was for the limited purpose described in the first paragraph
of this section and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies. Given these limitations, during our audit we did
not identify any deficiencies in internal control that we consider to be material weaknesses.
However, material weaknesses may exist that have not been identified.
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 the City's 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 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 or other matters that are
required to be reported under Government Auditing Standards.
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. However,
this report is a matter of public record and its distribution is not limited. It also serves to
disseminate information to the public as a reporting tool to help citizens assess government
operations.
>. �
TROY KELLEY
STATE AUDITOR
September 17, 2013
Washington State Auditor's Office _
4
Independent Auditor's Report on Compliance
For Each Major Federal Program and on
Internal Control Over Compliance in
Accordance with OMB Circular A -133
City of Yakima
Yakima County
January 1, 2012 through December 31, 2012
Mayor and City Council
City of Yakima
Yakima, Washington
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM
We have audited the compliance of the City of Yakima, Yakima County, Washington, with the
types of compliance requirements described in the U.S. Office of Management and Budget
(OMB) Circular A -133 Compliance Supplement that could have a direct and material effect on
each of its major federal programs for the year ended December 31, 2012. The City's major
federal programs are identified in the accompanying Federal Summary.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts
and grants applicable to its federal programs.
Auditor's 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 rovides a reasonable basis for our opinion on compliance for each
p p p
major federal program. Our audit does not provide a legal determination on the City's
compliance.
Washington State Auditor's Office
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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 December 31, 2012.
REPORT ON INTERNAL CONTROL OVER COMPLIANCE
Management of the City 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 in order to determine the auditing procedures that are appropriate in the circumstances
for the purpose of 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 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.
PURPOSE OF THIS REPORT
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. However, this report is a matter of public record and its distribution is not limited. It
Washington State Auditor's Office
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i
also serves to disseminate information to the public as a reporting tool to help citizens assess
government operations.
TROY KELLEY
STATE AUDITOR
September 17, 2013
Washington State Auditor's Office
7
Independent Auditor's Report on Financial
Statements
City of Yakima
Yakima County
January 1, 2012 through December 31, 2012
Mayor and City Council
City of Yakima
Yakima, Washington
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of the governmental activities, the
business -type activities, each major fund and the aggregate remaining fund information of the
City of Yakima, Yakima County, Washington, as of and for the year ended December 31, 2012,
and the related notes to the financial statements, which collectively comprise the City's basic
financial statements as listed on page 11.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States of
America; this includes the design, implementation, and maintenance of internal control relevant
to the preparation and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these 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
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor's
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the City's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the City's internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements.
Washington State Auditor's Office
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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinions.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities, the business -type activities,
each major fund and the aggregate remaining fund information of the City of Yakima, as of
December 31, 2012, and the respective changes in financial position and, where applicable,
cash flows thereof, and the respective budgetary comparison for the general and community
development funds, for the year then ended in accordance with accounting principles generally
accepted in the United States of America.
Matters of Emphasis
As discussed in Note 13 to the financial statements, in 2012, the City adopted new accounting
guidance, Governmental Accounting Standards Board Statement No. 63. Financial Reporting of
Deferred Outflows of Resources, Deferred Inflows of Resources and Net Position. Our opinion
is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis on pages 12 through 25, pension trust fund information
on page 96 and information on postemployment benefits other than pensions on pages 96
through 97 be presented to supplement the basic financial statements. Such information,
although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board who considers it to be an essential part of financial reporting for
placing the basic financial statements in an appropriate operational, economic or historical
context. We have applied certain limited procedures to the required supplementary information
in accordance with auditing standards generally accepted in the United States of America,
which consisted of inquiries of management about the methods of preparing the information and
comparing the information for consistency with management's responses to our inquiries, the
basic financial statements, and other knowledge we obtained during our audit of the basic
financial statements. We do not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence to express
an opinion or provide any assurance.
Supplementary and Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City's basic financial statements. 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. This schedule 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 basic 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
Washington State Auditor's Office
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accepted in the United States of America. In our opinion, the information is fairly stated, in all
material respects, in relation to the basic financial statements taken as a whole.
OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS
In accordance with Government Auditing Standards, we have also issued our report dated
September 17, 2013 on our consideration of the City's internal control over financial reporting
and on our tests of its compliance with certain provisions of laws, regulations, contracts and
grant agreements and other matters. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that testing,
and not to provide an opinion on internal control over financial reporting or on compliance. That
report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering the City's internal control over financial reporting and compliance.
TROY KELLEY
STATE AUDITOR
September 17, 2013
Washington State Auditor's Office
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Financial Section
Cit y of Yakima
Yakima County
January 1, 2012 through December 31, 2012
REQUIRED SUPPLEMENTARY INFORMATION
Management's Discussion and Analysis - 2012
BASIC FINANCIAL STATEMENTS
Statement of Net Position — 2012
Statement of Activities — 2012
Balance Sheet — Governmental Funds — 2012
Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental
Funds — 2012
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund
Balances of Governmental Funds to the Statement of Activities — 2012
Statement of Revenues, Expenditures and Changes in Fund Balances — Budget and
Actual — General Fund — 2012
Statement of Revenues, Expenditures and Changes in Fund Balances — Budget and
Actual — Community Development Fund — 2012
Statement of Net Position — Proprietary Funds — 2012
Statement of Revenues, Expenses and Changes in Fund Net Position — Proprietary
Funds — 2012
Statement of Cash Flows — Proprietary Funds — 2012
Statement of Net Position — Fiduciary Funds — 2012
Statement of Changes in Net Position — Fiduciary Funds — 2012
Notes to Financial Statements — 2012
REQUIRED SUPPLEMENTARY INFORMATION
Pension Trust Fund Information — 2012
Information on Postemployment Benefits Other Than Pensions — 2012
Schedule of Funding Progress — Other Postemployment Benefits (OPEB) — 2012
SUPPLEMENTARY AND OTHER INFORMATION
Schedule of Expenditures of Federal Awards — 2012
Notes to the Schedule of Expenditures of Federal Awards — 2012
Washington State Auditor's Office
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