HomeMy WebLinkAbout12/08/2009 10 State Auditor's Report - City's 2008 Financial Statements . BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No.
For Meeting Of: December 8, 2009
ITEM TITLE: State Auditor's Report – City's 2008 Financial Statements
SUBMITTED BY: Finance Department
CONTACT: Rita M. DeBord, Finance Director; 575-6070
Cindy Epperson, Deputy Director Accounting / Budgeting; 575-6070
SUMMARY EXPLANATION:
Introduction: Attached for Council review 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, 2008,
Note: 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:
(c) Compliance with laws and regulations •
(d) Evaluation of internal controls •
3. Financial Statements (and related disclosures and internal controls)
Overview: As stated in the enclosed auditor's reports, the Auditors gave the City's Financial
Statements an Unqualified Opinion (i.e.: a clean opinion with no qualifications – the highest
possible rating). The Auditor's did identify two "Findings" in the Federal program controls,. which are
instances where Federal rules were not followed or properly documented. Neither of these findings
resulted in any "Questioned Costs" which could result in the return of the grant funds. In one instance
documentation was not properly filed, and in the second instance, staff has a difference of interpretation
of a rule. (See further discussion below). Because these instances of "non-compliance" were related to
Vendors that received more than one-half of the total program costs, the Auditors are issuing a qualified
opinion on compliance with applicable requirements for 2 federal programs—the HOME Investment
Partnerships Program, and the Healthy Marriage Promotion and Responsible Fatherhood Program.
Staff has been in contact with the applicable grantors, and has determined that our corrective action
plans are sufficient and will not jeopardize future grant awards for these particular programs. •
Continued on next page
Resolution Ordinahce Other (Specify) Report - 2008 State Audit
Contract Mail to (name and address): . Phone: Funding
Source N/A vb.
APPROVED FOR SUBMITTAL:
City Manager
STAFF RECOMMENDATION: Accept Report
,OARD/COMMISSION RECOMMENDATION:
• COUNCIL ACTION: •
•
A final accountability report from the State Auditor's is scheduled for submission to the City in' the near
future. That will complete the auditor's work and reporting to the City regarding fiscal year 2008.
A full copy of the audit report has been included in the agenda package provided to City Council
Members and Department Heads. Due to the sizeand complexity of these documents, only the •
auditors written reports and comments have been included for general distribution, (i.e.: the financial
statements themselves and the related footnotes, Management Discussion and Analysis and
supplemental information are not included in the general distribution). However, anyone interested may
request a full copy of the report through the City Clerk's Office. (Additionally, the Comprehensive
Annual Financial Report (CAFR) is posted on the City's website. To access the CAFR on=line, go to
"www.ci.yakima.wa.us"; then go to "Services" and click on "Finance"; then click on "$", and then "2008
Comprehensive Annual Financial Report". )
. Audit Results Summary:
1(a) Financial Reporting - Internal Controls: The auditors reviewed the City's internal controls over
financial reporting to the extent the Auditor's cohsidered necessary for the purpose of designing • .
their auditing procedures for the purpose of expressing their- opinion on the financial statements.
The audit states (oo, 12): ... "we did not identify any deficiencies in internal control over financial
reporting that we consider to be material weaknesses"...
1 (b) Financial Reporting - Compliance: As part of their review to assure 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 (pg. 12): ... "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 (a) Federal Program Regulations - Compliance: The auditors audited and expressed an opinion on - *
the City of Yakima's compliance with the requirements of laws, regulations, contracts and grants
applicable to each of the City's major federal programs. The four programs specifically audited were: .
> Community Development Block Grants
> HOME Investment Partnerships Program (HOME)
> Highway Planning and Construction
• > Healthy Marriage Promotion and Responsible Fatherhood (Healthy Families)
As summarized above, the auditors did document instances of non-compliance regarding
procurement and suspension and debarment that are applicable to the HOME and Healthy
Families programs. In all of these programs, the rules are understood by applicable staff and
procedures are in place to perform the required actions. However, either because of clerical error
or a difference in interpretation of the rule, the auditors identified instances of non-compliance.
Pages 3 through 10 of the auditor's report details the auditors finding and the City's response.
Even though the City received these findings, please note that there were no "questioned costs"
which could be required to be refunded to.the grahting agencies. The audit report on Compliance
. is located on pages 13 through 15 of the attached material.
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Continued on next page
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Page 2 of 3
2 (b) Federal Regulations - 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 and to test
and report on internal control over compliance in accordance with OMB Circular A-133. The
findings identified above also were cited as being examples of significant deficiencies in internal
control over compliance, although staff is aware of and regularly follows applicable federal grant
• requirements.
•
3) Financial Statements: SAO audited - and expressed an opinion on - the City's Financial
Statements for the period January 1 through December 31, 2008. The auditors gave the City an
unqualified opinion - the highest rating possible. The auditors stated (pg. 16): "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, 2008, and the respective
changes in financial position and cash flows, where applicable, thereof, and the respective
budgetary comparisons for the General and Community Development Funds for the year then .
ended, in conformity with accounting principles generally accepted in the United States of America."
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Page 3 of 3
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Washington State Auditor
Brian Sonntag
INDEPENDENT AUDITOR'S REPORT
September 14, 2009
•
Council
City of Yakima
Yakima, Washington
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, 2008,
which collectively comprise the City's basic financial statements as listed in the table of
contents. These financial statements are the responsibility of the City's management. Our
responsibility is to express opinions on these financial statements based on our audit. The prior
year summarized comparative information has been derived from the City of Yakima's 2007
financial statements and, in our report dated September 12, 2008, we expressed unqualified
opinionson the respective financial statements of the governmental activities, the business-type
activities, each major fund, and the aggregate remaining fund information.
•
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 of material misstatement. 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. We believe
that our audit provides a reasonable basis for our opinions.
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, Yakima
County, Washington, as of December 31, 2008, 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 conformity with
accounting principles generally accepted in the United States of America.
As described in Note 1 2, during the year ended December 31, 2008, the City implemented the
Governmental Accounting Standards Board's Statement 45, Accounting and Financial
Reporting by Employers for Postemployment Benefits Other Than Pensions.
•
5 Insurance Building, PO Box 40021 • Olympia, Washington 98504-0021 (360) 902-0370 • TDD Relay (800) 833-638S
FAX (360) 753-0646 • http://www.saowa.ov
•
The financial statements include summarized prior year comparative information. Such
information does not include all of the information required for a presentation in conformity with
accounting principles generally accepted in the United States of America. According|y, such
information should be read in conjunction with the City's financial statements for the year ended
December 31. 2007. from which such summarized information was derived.
In accordance with Government Auditing we will also issue our report dated
September 14, 2009. on our consideration of the City's internal control over financial reporting
and on our tests of its compliance with certain provisions of |avvo, nagu|adons, 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 teaUOg,
and not to provide an opinion on the internal control over financial reporting or on cornpUanoo.
That report is an integral part of an audit performed in accordance with Government Auditing
Standards and should be considered in assessing the results of our audit.
The management's discussion and analysis on pages 3 through 18, pension trust fund
information on page 95 and information on postemployment benefits other than pensions on
page 86 are not a required part of the basic financial statements but are supplementary
information required by the Governmental Accounting Standards Board. We have applied
certain limited procedu[es, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the required supplementary information.
Hovxever, we did not audit the information and express no opinion on it.
Our audit was performed for the purpose of forming opinions on the financial statements that
collectively comprise the City's basic financial statements. The accompanying information listed
as combining financial statements on pages 97 through 151 is presented for purposes of -
additional analysis and is not a required part of the basic financial statements. This information
has been subjected to auditing procedures applied in the audit of the basic financial statements
and, in our opinion, is fairly stated, in all material [especto, in relation to the basic financial
statements taken as a whole.
The information identified in the table of contents as the Introductory Section, Capital Assets on
pages 153 through 157. Supplemental Schedules on pages 159 through 172, and the Statistical
Section on pages 173 through 197 is presented for purposes of additional analysis and is not a
required port of the basic financial statements of the City. Such information has not been
subjected to the auditing procedures applied in the audit of the basic financial statements and,
accordingly, we express no opinion on it.
Sincerely,
. '
v '
BRIAN SONNTAG, CGFM
STATE AUDITOR
' '
Washington State Auditor's Office
Financial Statements and Federal Single Audit Report
City of Yakima
Yakima County
Audit Period
January 1, 2008 through December 31, 2008
Report No. 1002542
,dole WASHINGTON
Issue Date 41 . - e - BRIAN SONNTAG
November 30, 2009 1) Nov, - °° cr. STATE AUDITOR
N-,14,11 ,.
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Washington State Auditor
Brian Sonntag
November 30, 2009
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,
BRIAN SONNTAG, CGFM
STATE AUDITOR
Table of Contents
City of Yakima
Yakima County
January 1, 2008 through December 31, 2008
Federal Summary ... ...... . ........ . . ....... ............................... . ..... ........ .......... ..... ...................1
Schedule of Federal Audit Findings and Questioned Costs ...... ....................................... ............ 3
Independent Auditor's Report on Internal Control over Financial Reporting and on
Compliance and Other Matters in Accordance with Government Auditing
Standards ............: ............... ...,.„.... ............................ . ....... ........ ............................ 11
Independent Auditor's Report on Compliance with Requirements Applicable to each
Major Program and Internal Control over Compliance in Accordance with OMB
Circular ............ ............ ...................... ...... 13
Independent Auditor's Report on Financial 16
Financial Section 18
Federal Summary
City of Yakima
Yakima County
' January 1, 2008 through December 31, 2008
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 unqualified 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 significant 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 identified deficiencies in the design or operation of
internal control over major federal programs that we consider to be significant
deficiencies.
• Material Weaknesses: We identified significant deficiencies that we consider to be
material weaknesses.
We issued an unqualified opinion on the City's compliance with requirements applicable to its
major federal programs, with the exception of the HOME Investment Partnerships Program and
Healthy Marriage Promotion and Responsible Fatherhood program on which we issued a
qualified opinion on compliance with applicable requirements.
We reported findings that are required to be disclosed under OMB Circular A-133.
Washington State Auditor's Office
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Identification of Major Programs:
The following were major programs during the period under audit:
CFDA No. Program Title
14.218 CDBG — Entitlement and (HUD- Administered) Small Cities Cluster —
Community Development Block Grants /Entitlement Grants
14.239 HOME Investment Partnerships Program
20.205 Highway Planning and Construction Cluster— Highway Planning and
Construction
93.086 Healthy Marriage Promotion and Responsible Fatherhood
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
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Schedule of Federal Audit Findings and
Questioned Costs
City of Yakima
Yakima County
January 1, 2008 through December 31, 2008
1. The City's internal controls were inadequate to ensure compliance with
federal procurement requirements for its Healthy Marriage and Responsible
Fatherhood program.
CFDA Number and Title: 93.086 Healthy Marriage Promotion and
Responsible Fatherhood
Federal Grantor Name: U.S. Department of Health and Human
Services
Federal Award/Contract Number: NA
Pass-through Entity Name: Department of Social and Health Services,
Division of Child Support
Pass-through Award/Contract 0664-94430
Number:
Questioned Cost Amount: $0
Background
The primary objective of the Healthy Marriage and Responsible Fatherhood grant
program is to increase paternity establishment and child support enforcement, connect
fathers with their families and promote healthy marriages and healthy outcomes for
couples, parents and children. The program plan includes activities such as relationship
education for couples and a bilingual media campaign. The Washington Department of
Social and Health Services administers the grant. An independent contractor manages
the grant program for the City.
Description of Condition
The City spent $365,080 in federal Healthy Marriage and Responsible Fatherhood grant
funds during fiscal year 2008. The City paid a contractor $153,102 to produce
advertisements about the program and place them in media outlets. The City did not
follow federal procurement requirements when selecting the contractor.
Federal regulations require grantees to follow their own procurement procedures as long
as they comply with state laws and federal regulations. For purchases not covered
under state law, such as professional services, grantees must follow procurement
methods set forth in federal regulations. For purchases that exceed $100,000, grantees
must formally bid the contract. Grantees may solicit services from only one vendor when
they determine awarding the contract is not feasible using bids or competitive proposals,
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Washington State Auditors Office
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the goods and services are available only from one source or competition is determined
to be inadequate. Grantees and subgrantees must document their procurement efforts.
The City stated it obtained three quotes from vendors before granting the contract.
However, we found the City did not use a formal bidding process to select the contractor,
• in accordance with federal procurement requirements.
Cause of Condition
The City's contracted grant program manager procured the media marketing contract on
behalf of the City. Program staff did not understand that services procured in this
manner had to comply with federal requirements and did not ensure the contractor
followed the appropriate purchasing procedures.
Effect of Condition
Contractors were not provided .an opportunity to compete for the contract, which could
have affected contract price and quality of service.
Recommendation
We recommend the City:
• Maintain documentation supporting its compliance with federal procurement
requirements.
• Implement internal controls to ensure staff procuring goods and services with
federal funds comply with federal requirements.
City's Response
This contract was to obtain a media purchasing agent (i.e. a consultant/broker for media
placement), with the base retainer being $15,000 per year. In accordance with City
Policy, professional services such as broker services do not require to be bid. However,
to ensure that the "best deal" was obtained for this work, the Executive Director of the
program contacted three potential service providers, and inquired about availability,
billing rates and interest in doing pro bono work for the program.
The selected vendor agreed to a monthly retainer, which included media procurement as
well as writing for other projects. They also expressed a willingness to work with the
program as much as necessary to get the project rolling at no additional charge. As the
Executive Director had formerly been involved in media placement, she had a strong
background from which to make this decision, and has been extremely satisfied with the
level of work performed.
In addition to paying the vendor the base retainer, all of the media purchases are being
passed through this vendor, which is what brought the total paid in the year from
$15,000 to the $153, 102. (It should also be noted that the minimum local match
required by this grant is one-third—the vendor was able to obtain almost a 50% match
from the media providers.)
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The City has a strong kno and ba e federal procurement rules, and
because of the nature of the purchase 8e. a broker) believed that telephone quotes
were adequate for this type ofprocurement. Further, because of the extra work put into
the program by the vendor and the extensive match negotiated with the media providers
by the vendor, the Healthy Families program has likely received the "best deal" for this
component, '
Auditor's Remarks
• Federal regulations require grantees to use formal bidding procedures when making
payments for professional services that exceed $100.000. The City's payment to the
contractor was in excess of this amount. We reaffirm our finding.
Applicable laws and Regulations
U G. Office of Management and Budget Circular A-133, Audits of States, Local
Governments, and Non-Profit Organizotiono.Section 3OO, states inpa�:
The auditee shall:
(b) Maintain internal control over Federal programs that provides
reasonable assurance that the auditee is managing Federal
awards in compliance with |mvvo, regu|adono, and the provisions of
contracts or grant agreements that could have a material effect on
each of its Federal programs.
Title 45, Code of Federal Regu\adons, Section 92.36 — Pnocunamerd, states in part:
(b) Procurement standards.
'
(1) Grantees and subgrantees will use their own procurement
procedures which reflect applicable State and local laws and
reQu|at|ons, provided that the procurements conform to applicable
Federa the standards identified in this section
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/S\ Grantees and subgrantees will maintain records sufficient to
detail the significant history of a procurement. These records will
ino|ude, but are not necessarily limited to the following: rationale
for the method of procurement, selection of contract type,
contractor selection or rejection, ond the basis for the contract
price .. .
(d) Methods of procurement to be followed.
(1) Procurement by smatl purchase procedures. Small purchase
cod those i | d info i procurement
procedures are oae arnpa �n informal procunonne
methods for securing aen/icea, supplies, or other property that do
not cost more than the simplified acquisition threshold fixed at 41
U.S.C.403/11> (currently set at $1O0.00O). If small purchase
vvaxmnymnsm'eAum/orsOffice
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procedures are used, price or rate quotations shall be obtained
from an adequate number of qualified sources . . .
(2) Procurement by sealed bids (formal advertising). Bids are
publicly solicited and a firm-fixed-price contract (lump sum or unit
price) is awarded to the responsible bidder whose bid, conforming
with all the material terms and conditions of the invitation for bids,
is the lowest in price . . .
(3) Procurement by competitive proposals. The technique of
competitive proposals is normally conducted with more than one
source submitting an offer, and either a fixed-price or cost-
reimbursement type contract is awarded. It is generally used when
conditions are not appropriate for the use of sealed bide . . .
(4) Procurement by noncompetitive proposals is procurement
through solicitation of a proposal from only one oou,ne, or after
solicitation of a number of sources, competition is determined
inadequate.
(U Procurement by noncompetitive proposals may be used
only when the award of a contract is infeasible under small
purchase procedures, sealed bids or competitive proposals
, and one of the following circumstances applies: (A) The
item is available only from a single source .. .
Washington State Auditors Office
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Schedule of Federal Audit Findings and
Questioned Costs
City of Yakima
Yakima County
• January 1, 2008 through December 31, 2008
2. The City of Yakima's internal controls are inadequate to ensure compliance
with federal suspension and debarment requirements.
CFDA Number and Title: 14.218 Community Development Block Grant
• 14.239 HOME Investment Partnership
Program
20.205 Highway Planning and Construction
93.086 Healthy Marriage Promotion and
Responsible Fatherhood
Federal Grantor Name: NA
Federal Award/Contract Number: CDBG: B 07-M053-0008
HOME: M08-MC53-0203
HOME: M07-MC53-0203
Pass-through Entity Name: Healthy Marriage Promotion and Responsible
Fatherhood — Department of Social and
Health Services
Highway Planning and Construction —
Department of Transportation
Pass-through Award/Contract Healthy Marriage Promotion and Responsible
Number: Fatherhood — 0664-94430
Highway Planning and Construction — STPE-
-
1485(020)
Questioned Cost Amount: $0
Background
Recipients of federal grants are prohibited from contracting with or making subawards to
parties that are suspended or debarred from doing business with the federal
government. If a vendor certifies in writing that it has not been suspended or debarred,
the grantee may rely on that certification. Alternatively, the grantee may check for
suspended or debarred parties by reviewing the federal Excluded Parties List issued by
the U.S. General Services Administration. This requirement should be met prior to the
first payment to the vendor.
Description of Condition
During 2008, the City spent the following federal grant money:
• $1,670,230 from the Community Development Block Grant.
Washington State Auditors Office
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• $624,342 from the HOME Investment Partnership Prograrn.
• $849,170 $849,170 In the Highway Planning and Construction Program.
• $365,080 in the Healthy Marriage and Responsible Fatherhood Frogram.
We noted several instances in which the City did not comply with federal requirements to
ensure vendors and subgrantees are not suspended or disbarred from receiving federal
grant funds:
• Community Develpoment Block Grant: The City paid one vendor $75.000 in
federal funds.
• HOME Investment Partnership Program: The City paid one vendor $149.917
and one aubrec\piard$2DO.00O.
• Highway Planning and Construction: The City paid one vendor $DO.9B8.
• Healthy Marriage and Responsible Fatherhood: The City paid one vendor
$153.102.
Cause of Condition
The City did not knovv it was required to verify suspension and debarment for
subrecipients and certain vendors, such as consultants and nonprofit organizations.
For its highway construction program, the City did not use the standard contract
template provided by the Washington State Department of Transportation, which
includes a suspension and debarment. certification. instead, the City created its own
uontract, which omitted the certification.
Effect of Condition � � '
• �
VVithout adequate internal controls over suspension and debarment the City cannot
ensure federal funds are paid to vendors or subrecipients that are eligible to participate
in federal programs. Any payments made to an ineligible party are unallowable and
would be subject to recovery by the funding agency. Hovvever, we were able to verify
that the, vendors and subrecipients in question were not suspended or debarred.
Therefore, we are not questioning costs.
Recommendation
�8
We recommend the City establish and perform procedures related to suspension and
debarment requirements to ensure vendors and subrecipients are eligible to receive
. federd| nda
City's Response
The City believes that it does, in fact, have adequate systems in place with regards to
federal suspension and debarment requirements; the items identified in the 2008 audit
Washington State Auditors Office
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were explainable and understandable exceptions. Following are the reasons for the
exceptions:
1) In the case of Community Development and HOME Grants, the vendor/sub-
recipient not verified are non-profit organizations which, in fact, are direct
recipients of major federal grants. It is the policy of the Office of Neighborhood
Development Services to check the suspension/debarment website, and print off
the report for the vendor file. According to the manager, the verification was
likely done, however, the documentation was either not printed or filed correctly.
Since these organizations were still actively receiving / administering other
federal grants, staff had no reason to suspect they were debarred.
2) The Highway Planning & Construction exception was a minor contract (under
$50,000) for which the standard contract was substituted by another contractor
which didn't document suspension and debarment; however, it was understood
that no disbarment existed.
3) The vendor in question for the Healthy Marriage and Responsible Fatherhood
Grant is a consultant /broker for media placement. The retainer fee for the
broker services was only $15,000 per year, below the threshold of $25, 000; thus,
no suspension / disbarment review was required.
Due to the fact that purchases for media ads, and not just the retainer fees, flowed
through this vendor, the threshold appeared to be exceeded. However, the media
purchases were separately reviewed and only reimbursements for valid expenditures
were made to the broker.
The City recognizes the importance of meeting federal requirements and the significant
consequences of not doing so. Although there are procedures in place to help ensure
that federal suspension / disbarment requirements are met - and these procedures have
been utilized - and deemed sufficient - for many years, different circumstances led staff
to believe that certification was not required in the above cases, We would like to
assure the readers that these were isolated incidents, that no use of federal funds are in
question, and that staff will confirm vendor status in these situations in the future.
Auditor's Remarks
We appreciate the steps the City is taking to resolve this issue. We will review the
condition during our next audit.
We thank City officials for the assistance we received during the audit.
Applicable Laws and Regulations
U.S. Office of Management and Budget Circular A-133, Audits of States, Local
Governments, and Non-Profit Organizations, Section 300, states in part:
The auditee shall:
(b) Maintain internal control over Federal programs that provides
reasonable assurance that the auditee is managing Federal
Washington State Auditors Office
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awards in compliance with laws, regulations, and the provisions of
contracts or grant agreements that could have a material effect on
each of its Federal programs.
Title 2, Code of Federal Regulations, Section 180.300 — What must I do before I enter
into a covered transaction with another person at the next lower tier?
When you enter into. a covered transaction with 'another person at the
next lower tier, you must verify that the person with whom you intend to
do business is not excluded or disqualified. You do this by:
(a) Checking the EPLS; or
(b) Collecting a certification from that person if allowed by this
rule; or
(c) Adding a clause or condition to the covered transaction with
that person.
Washington State Auditors Office
10
Independent Auditor's Report on Internal
Control over Financial Reporting and on
Compliance and Other Matters in Accordance
with Government Auditing Standards
City of Yakima
Yakima County
January 1, 2008 through December 31, 2008
Council
City of Yakima
Yakima, Washington
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 Yakima,
Yakima County, Washington, as of and for the year ended December 31, 2008, which
collectively comprise the City's basic financial statements, and have issued our report thereon
dated September 14, 2009. The prior year summarized comparative information has been
derived from the City's 2007 basic financial statements that we issued our report thereon dated
September 12, 2008. During the year ended December 31, 2008, the City implemented
Governmental Accounting Standards Board Statement 45, Accounting and Financial Reporting
by Employers for Postemployment Benefits Other Than Pensions.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to the financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States.
INTERNAL CONTROL OVER FINANCIAL REPORTING
In planning and performing our audit, we considered the City's internal control over financial
reporting as a basis for designing our auditing procedures 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 over financial reporting. Accordingly, we do not
express an opinion on the effectiveness of the City's internal control over financial reporting.
A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control
deficiency, or combination of control deficiencies, that adversely affects the City's ability to
initiate, authorize, record, process or report financial data reliably in accordance with generally
accepted accounting principles such that there is more than a remote likelihood that a
misstatement of the City's financial statements that is more than inconsequential will not be
prevented or detected by the City's internal control.
Washington State Auditors Office
11
A rnataha| weakness is a significant deficiency, or combination of significant daficienciaa. that
results in more than a remote likelihood that a material misstatement of the financial statements
will not be prevented or detected by the entity's internal control.
Our consideration of internal control over financial reoorting was for the limited purpose
described in the firs paragraph of this section and would not necessarily identify all deficiencies
in internal control that might be significant deficiencies or material weaknesses. We did not
identify any deficiencies in internal control over financial reporting that we consider to be
material weaknesses, as defined above.
However, we noted certain matters that we will report to the management of the City in a
separate etter dated September 23, 2009.
COMPLIANCE AND OTHER MATTERS
As part of obtaining reasonable assurance about whether the City's financial statements are
free of material misstaten`ent, we performed tests of the City's compliance with certain
provisions of |ovva, nugu|aUono, contracts and grant agreements, noncompliance with which
could have a direct and material effect oh the determination of financial statement amounts.
Movvevar, providing an opinion on compliance with those provisions was not an objective of our
audd, and aocording/y, 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.
This report is intended for the information and use of management, the Counc||, federal
awarding agencies and pass-through entities. Howvever, 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
repor tool to help citizens assess government operations.
44 (
BRIAN SONNTAG. CGFN1
STATE AUDITOR
September 14, 2009
Washington State Auditors Office
12
•
Independent Auditor's Report on Compliance
with Requirements Applicable to each 'Major
Program and Internal Control over Compliance
in Accordance with OMB Circular A-133
City of Yakima
Yakima County
January 1, 2008 through December 31, 2008
Council
City of Yakima
Yakima, Washington
COMPLIANCE
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 are applicable to its major federal programs
for the year ended December 31, 2008. The City's major federal programs are identified in the
Federal Summary. Compliance with the requirements of laws, regulations, contracts and grants
applicable to its major federal programs 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 auditing standards generally
accepted in the United States of America; the standards applicable to the 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. Our audit does not provide a legal determination on the City's compliance
with those requirements.
As described in Findings 1 and 2 in the accompanying Schedule of Federal Audit Findings and
Questioned Costs, the City did not comply with requirements regarding procurement and
suspension and debarment that are applicable to the HOME Investment Partnerships and
Healthy Marriage Promotion and Responsible Fatherhood programs. Compliance with such
requirements is necessary, in our opinion, for the City to comply with requirements applicable to
the programs.
Washington State Auditors Office
13
In our opinion, except for the noncompliance described in the preceding paragraph, the City
complied, in all material reapacta, with the requirements referred to above that are applicable to
its major federal programs for the year ended December 31, 2008. The results of our auditing
procedures also disclosed instances of noncompliance with those requirements which are
required to be reported in accordance with OMB Circular A-133 and which are described in the
accompanying Schedule of Federal Audit Findings and Questioned Costs as Findings 1 and 2.
INTERNAL CONTROL OVER COMPLIANCE
The 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 the 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
connp|ianoe, but not for the purpose of expressing an opinion on the effectiveness of internal
control over compliance. A000rding|y, we do not express an opinion on the effectiveness of the
City's internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose described in
the preceding paragraph and would not necessarily identify all deficiencies in the entity's
internal control that might be significant deficiencies or material weaknesses as defined below.
Hovvever, as discussed be|ovv, we identified certain deficiencies in internal control over
compliance that we consider to be significant deficiencies.
A control deficiency in an entity's internal control over compliance exists when the design or
operation of a control does not allow management or ennp|oyeen, in the normal course of
performing their assigned functions, to prevent or detect noncompliance with a type of
compliance requirement of a federal program on a timely basis. A significant deficiency is a
control def)cienoy, or combination of control defioienoien, that adversely affects the entity's
ability to administer a federal program such that there is more than a remote likelihood that
noncompliance with a type of compliance requirement of a federal program that is 'more than
inconsequential will not be prevented or detected by the entity's internal control. We consider
the deficiencies in internal control over compliance described in the accompanying Schedule of
Federal Audit Findings and Questioned Costs as Findings 1 and 2 to be significant deficiencies.
A material weakness is a significant deficiency, or combination of significant defioienoiea, that
results in more than a remote likelihood that material noncompliance with a type of compliance
requirement of a federal program will not be prevented or detected by the entity's internal
control. Of the significant deficiencies in internal control over compliance described in the
accompanying Schedule of Federal Audit Findings and Questioned Costs, we consider
Findings 1 and 2 to be material weaknesses.
The City's responses to the findings identified in our audit are described in the accompanying
Schedule of Federal Audit Findings and Questioned Costs. We did not audit the City's
response and, accordingly, we express no opinion on it.
This report is intended for the information of management, the Council, federal awarding
agencies and pass-through entities. Hovvever, this report is a matter of public record and its
Washington State Auditors Office
14
distribution is not limited. It also serves to disseminate information to the public as a reporting
tool to help citizens assess government operations.
BRIAN SONNTAG, SONNTAG, CGFM
STATE AUDITOR
September 14, 2009
•
Washington State Auditors Office
15
Independent Auditor's Report on Financial
Statements
City of Yakima
Yakima County
January 1, 2008 through December 31, 2008
Council •
City of Yakima
Yakima, Washington
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, 2008,
which collectively comprise the City's basic financial statements as listed on page 18. These
financial statements are the responsibility of the City's management. Our responsibility is to
express opinions on these financial statements based on our audit. The prior year summarized
comparative information has been derived from the City's 2007 financial statements and, in our
report dated September 12, 2008, we expressed unqualified opinions on the respective financial
statements of the governmental activities, the business -type activities, each major fund and the
aggregate remaining fund information.
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 of material misstatement. 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. We believe
that our audit provides a reasonable basis for our opinions.
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, 2008, 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 conformity with accounting principles generally
accepted in the United States of America.
As described in Note 12, during the year ended December 31, 2008, the City implemented
Governmental Accounting Standards Board Statement 45, Accounting and Financial Reporting
by Employers for Postemployment Benefits Other Than Pensions.
In accordance with Government. Auditing Standards, we have also issued our report on our
consideration of the City's internal control over financial reporting and on our tests of its
Washington State Auditor's Office
16
compliance with certain provisions of |avva, nagu|otions, 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 the internal control over financial reporting or on compliance. That report is an
integral part of an audit performed in accordance with Government Auditing Standards and
should be considered in assessing the results of our audit.
•The management's discussion and analysis on pages 19 through 35, pension trust fund
information on page 105 and information on postemployment benefits other than pensions on
page 108 are not a required part of the basic financial statements but are supplementary
information required by the Governmental Accounting Standards Board. We have applied _
certain limited promnduren, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the required supplementary information.
Huvvever, we did not audit the information and express no opinion on it.
(]ur audit was performed for the purpose of forming an opinion 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.G. 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 has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, is fairly otated, in all material
rospmcts, in relation to the basic financial statements taken as a whole.
`1
~��^
^,
BRIAN SONNTAG, CGFM
STATE AUDITOR
September 14, 2009
`
wmn»mgtcm State Auditor's Office
n
Financial Section
City of Yakima
Yakima County
January 1, 2008 through December 31, 2008
REQUIRED SUPPLEMENTAL INFORMATION
Management's Discussion and.Analysis — 2008
BASIC FINANCIAL STATEMENTS
Statement of Net Assets — 2008
Statement of Activities — 2008
Balance Sheet — Governmental Funds — 2008
Reconciliation of the Balance Sheet to the Government-Wide Statement of Net Assets —
2008
Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental
Funds — 2008
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund
Balances of Governmental Funds to the Statement of Activities — 2008
Statement of Revenues, Expenditures and Changes in Fund Balances — Budget and
Actual — General Fund — 2008
Statement of Revenues, Expenditures and Changes in Fund Balances — Budget and
Actual — Community Development Fund — 2008
Statement of Net Assets — Proprietary Funds — 2008
Statement of Revenues, Expenses and Changes in Fund Net Assets — Proprietary
Funds — 2008
Statement of Cash Flows — Proprietary Funds — 2008
Statement of Net Assets — Fiduciary Funds — 2008
Statement of Changes in Fund Net Assets — Fiduciary Funds — 2008
Notes to the Financial Statements — 2008
REQUIRED SUPPLEMENTAL INFORMATION
Schedule of Employer Contributions — Police and Fire — 2008
Schedule of Funding Progress Other Post Employment Benefits (OPEB) — 2008
SUPPLEMENTAL INFORMATION
Schedule of Expenditures of Federal Awards — 2008
Notes to the Schedule of Expenditures of Federal Awards — 2008
Washington State Auditor's Office
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