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HomeMy WebLinkAbout7.1 Selection of City Auditor 4 CITY OF DUBLIN AGENDA STATEMENT CITY COUNCIL MEETING DATE: June 27 , 1988 SUBJECT Selection of City Auditor EXHIBITS ATTACHED Proposal RECOMMENDATION 1) Appoint Maze & Associates Accountancy Corporation as the City Auditor V 2 ) Authorize Budget transfer from 1988-89 Contingent Reserve in the amount of $1 ,700 FINANCIAL STATEMENT: First year costs = $13 ,700 Second year costs = 14,385 Third year costs = 15 ,104 Fourth year costs = 15,859 DESCRIPTION The City recently mailed Requests for Proposals (RFP) to eight auditing firms . The Council ' s Audit Committee chose to interview four firms to better analyze the abilities and qualities suited for the City' s needs . The interview process included an explanation from the firms representatives of the experience , education, and secific expertise that comprised each firm' s unique history. The members of the Audit Committee questioned the representatives concerning bid prices and the level of stafing, the amount of detail that would be presented to the Council , the skills available to enhance the City' s search for new revenues , the ability to identify areas for cost savings , as well as the potential for additional project activities of the firms. All of the firms interviewed had excellent experience in auditing municipal governments . The firms were represented by individuals who exhibited a high level of knowledge and had a good level of experience . After reviewing the written proposals and in the process of the interviews , the Audit Committee felt that the firm of daze & Associates Accountancy Corporation possessed the highest level of skills , knowledge, and experience that most closely fits the current and future needs of the City. The firm ' s staff size , the decision level at which the principals are involved, and the perceived' independence were some of the deciding factors in choosing Maze & Associates . The Audit Committee , therefore , recommends that the City Council appoing the auditing firm of Maze & Associates Accountancy Corporation as the new City Auditor. ---------------------------------------------------------------------------- COPIES TO: ITE,H NO. r PROPOSAL FOR . FINANCIAL AND COMPLIANCE AUDITS OF CITY OF DUBLIN, CALIFORNIA AZE & ASSOCIATES ACCOUNTANCY CORPORATION 4AZE & ASSOCIATES ACCOUNTANCY CORPORATION Creekside Oaks 1470 Maria Lane - Suite 200 Walnut Creek, California 94596 (415) 930-0902 (916) 972-7333 June 15, 1988 Phil Molina, Finance Director City of Dublin PO Box 2340 Dublin, CA 94568 Dear Mr. Molina: This letter is to clarify our audit proposal of June 13, 1988 and is meant to be incorporated therein. In pricing the work described in our proposal we were extremely concerned about the City's RFP requirement that the amounts of the auditors' fees be fixed at this time for the next four years. In today's world, that is a very long time, especially when dealing with a rapidly growing and changing City such as Dublin. We also were concerned about the size and complexity of the City's financial statements and the probability that the financial statements will grow as new capital projects are added. Lastly, we approached the work from the point of view that the City might wish to prepare a Comprehensive Annual Financial Report for submission to the GFOA in the future. Based on our conversation with you today, in which you indicated that subsequent years' fees could be renegotiated if the above events or others of similar material effect occurred, we have revised our earlier fee estimates. In place of our original 1987-88 fee, we propose a fee of $13 00 which includes an estimated $3,700 for Single Audit Act work. Our fee for 1987-88 will not exceed this amount in the absence of unforeseen circ sta ces as noted on page 8 of our proposal. In the event there are no material anges such as those above, our fee for subsequent years will b $14,385 i 1988-89, $15,104 in 1989-90 and $15,859 in 1990-91. Please call if you need further information. Yours very truly, S� J. Scott Maze JSM:j 1 A Professional Corporation i PROPOSAL FOR FINANCIAL AND COMPLIANCE AUDITS OF CITY OF DUBLIN, CALIFORNIA MAZE & ASSOCIATES 1470 MARIA LANE, SUITE 200 WALNUT CREEK, CA 94596 CONTACT PERSON: SCOTT MAZE -- JUNE 13, 1988 i -i- CITT OF DUBLIN ? AUDIT PROPOSAL i ' TABLE OF CONTENTS Title Page i Letter of Transmittal 1 Profile of Maze & Associates 1 Mandatory Criteria 2 Summary of Our Qualifications 3 Our Approach to Your Examination 6 Compensation 9 Additional Data 10 -ii- CITY OF DUBLIN AUDIT PROPOSAL LETTER OF TRANSMITTAL Our Understanding of the Work We understand you need an independent accountant who can perform audit examinations in accordance with generally accepted auditing standards as well as those federal and State standards which may apply. We also understand you need an accounting resource who can help you implement Governmental Accounting Standards Board pronouncements and who can help you with current accounting questions. The work we will accomplish as part of our audit will include an examination of the financial statements of the City and the preparation of our report on your financial statements. At the same time we will perform the audit work required under the Single Audit Act and issue our report on that work separately. We will also prepare our Administrative and Internal Control Recommendations. Examples of the reports we will issue are at Appendix A. All our work will be completed and our reports issued within 120 days of the end of your fiscal year. Fee Our fee for the general audit portion of the above work will be $15,940 in 1987-88, $16,317 in 1988-89, $17,133 in 1989-90 and $17,989 in 1990-91. Our fee for the Single Audit Act portion of the above work will be $4,000 in 1987-88 and will remain at that level if the City's volume of such grants or contracts remains at 1987-88 levels. Authorized Contact Scott Maze is authorized to represent and bind our firm. He is the owner and Chief Executive Officer of Maze & Associates and may be reached at 1470 Maria Lane, Suite 200, Walnut Creek, CA 94596, telephone number (415) 930-0902. PROFILE OF MAZE & ASSOCIATES Maze & Associates is a relatively new local firm with a surprising depth of experience in municipal audit work. We offer a full range of accounting and auditing services including both governmental and commercial work. Our government work includes cities, redevelopment agencies, special districts and school districts as well as federal and State grantees. We are familiar with the financial and reporting requirements you must meet and have dealt extensively with the requirements of the Single Audit Act of 1984. We have already assisted the City of Manteca in winning the California Society of Municipal Finance Officers' award for Meritorious Financial Reporting - the only City this year to win the award on their first attempt. We will perform your work from our office in Walnut Creek, which has a staff of fourteen people. Our staff includes our owner, two managers, three supervisors, four professional staff, one paraprofessional and three office staff. -1- We are a full service f_ .. We perform commercial and gt, _rnmental audit work, provide tax planning and preparation services, computer accounting and consultation, litigation support and other professional services. Our major municipal clients include: City of Manteca Manteca Recreational Facilities Corporation Manteca Redevelopment Agency City of Rocklin Rocklin Redevelopment Agency Town of Loomis ' - City of Pinole Pinole Redevelopment Agency South San Joaquin Irrigation District City of E1 Cerrito E1 Cerrito Redevelopment Agency Dixie Elementary School District Larkspur Elementary School District Mill Valley School District Petaluma Schools Piedmont Unified School District Reed Union Elementary School District Ross Valley School District Sausalito School District Tamalpais Union High School District Associated Students, Inc. , CSUS Most of the cities and school districts listed above are subject to Single Audit Act requirements. Our audits have incorporated all the requirements of the Single Audit Act for the past two years, as required by the State Controller's Office, which acts as the Cognizant Agency for the State of California. You should also know that we are growing steadily and have a solid client base. Some of our clients have been with us as long. as thirteen years, having come with us when I formed my own firm. The excellent service they received and the strong personal relationships they formed with my staff and with me motivated them to stay with us when I formed my own firm. Our practice has grown largely as a result of referrals and recommendations by these clients. MANDATORY CRITERIA Maze & Associates is a professional accountancy corporation under the rules and regulations established by the Board of Accountancy of the State of California. Our owner and managers are all California certified public accountants and are members of the American Institute of CPA's as well as the California Society of CPA's. We meet and exceed the independence standards prescribed by the Board of Accountancy and by the American Institute of CPA's and California Society of CPA's IARY OF OUR QUALIFICATIONS Our staff has the experience and education required to provide you with the information, feedback and financial reports you need. Each of our staff has completed courses in municipal auditing and our senior staff have completed courses in Single Audit Act requirements. Our staff assigned to your work will include Scott Maze as Owner-in-Charge, Cory Biggs as Manager, Mary Dodge as Supervisor and Kim Abele as Associate. Scott Maze will be responsible for the overall direction of the work, while Cory will manage the work, Mary will supervise the field work and she and Kim will spend the majority of their time on your work in your offices. Our individual qualifications and experience are outlined below: J. SCOTT MAZE, Owner I am a graduate of Lehigh University, Bethlehem, Pennsylvania, and hold CPA certificates in Pennsylvania and California. I joined Price Waterhouse & Co. in 1962 and served in the Pittsburgh, Sacramento and San Francisco offices of that firm. In 1977, I joined the Walnut Creek firm of Blanding, Boyer & Maze, later returning to Sacramento to become managing partner of Porterfield & Co. On January 1, 1986, I established Maze & Associates. My experience includes a broad range of commercial, manufacturing and governmental audit work in addition to local educational agencies. I am a member of the AICPA, California Society of CPA's, and NAA. My relevant municipal audit experience includes: City of Manteca Manteca Redevelopment Agency City of Rocklin Rocklin Redevelopment Agency City of Pinole Pinole Redevelopment Agency Town of Loomis South San Joaquin Irrigation District Tri-Dam Project Tri-Dam Power Authority Various school districts, special districts, JPA's and federal grantees. CORY BIGGS Cory is a graduate of CSUS Hayward with B.S. in Business, emphasis in Accounting. He is a California CPA with six years experience, three with Deloitte, Haskins & Sells, a major accounting firm and three with Seiler & Company, a large Bay Area local firm. Cory's experience includes school districts, two cities and a variety of high-tech and commercial for-profit organizations. His relevant municipal audit experience includes: City of Manteca Manteca Redevelopment Agency South San Joaquin Irrigation District Tri-Dam Project Tri-Dam Power Authority -3- r- MARY DODGE Mary has a combination of skills which lends itself particularly to municipal audit work. Her public accounting experience was gained at Touche Ross & Co, in Sacramento where her clients included the City of Sacramento, Sacramento Redevelopment Agency, and other municipal clients. Mary was also Controller of the University Foundation at California State University, Chico for over four years and thus has a unique perspective regarding municipal accounting problems and needs. She also has extensive federal and State grant experience. Since joining our firm, Mary has concentrated on municipal and fund accounting and auditing and has supervised the following audits: City of Rocklin Rocklin Redevelopment Agency Stanford Ranch Community Facilities District #2 Piedmont Unified School District Petaluma Schools Reed School District KIM ABELE Kim graduated from California State University, Hayward in 1985 with a B.S. in Business, emphasis in Accounting. Kim worked as a bookkeeper while in college and continued in private accounting for Long's Drugs on graduation. She joined us in February 1988 and has already gained municipal audit experience working on the following clients: City of Pinole City of E1 Cerrito Tamalpais Union High School District In the event one of the above people is unable to continue due to illness, accident or other cause, one of the people below will be substituted. ROBERT POWELL Bob is a graduate of Fordham University, New York City, and a CPA in New York, New Jersey, Georgia, and California. He was audit partner of Pannell Kerr Forster from 1962 through 1982 and partner-in-charge of their offices in Atlanta 1967/68, New York 1972/77 and San Francisco 1978/82. Bob retired December 31, 1982, but remained as quality control consultant through 1986. He is experienced in diversified auditing including manufacturing, service, and not-for-profit organizations. Bob is a member of the AICPA and California Society of CPA's. Bob's municipal audit experience includes: City of Pinole Pinole Redevelopment Agency City of San Pablo City of San Pablo Redevelopment Agency -4- SCOTT JOHNSON Scott is a graduate of CSUS Hayward with a B.S. in Business, emphasis in Accounting. He is currently enrolled in the Masters program at Hayward, and is a candidate for the CPA certificate. Scott has three years experience in public accounting including considerable governmental auditing as well as tax and accounting services work. His municipal audit experience includes: Dublin/San Ramon Services District City of E1 Cerrito Redevelopment Agency East Bay Regional Park District Emergency Shelter Program Hayward Area Recreation and Park District Livermore-Amador Valley Water Management Agency Ora Loma Sanitary District Tri-Valley Wastewater Authority ENG KHOO Eng has a bachelor's degree in accounting from the University of Canterbury in New Zealand and received his MBA in Finance from the University of San Francisco. In the summer of 1986, before emigrating to the U.S. , Eng passed his examinations as a chartered accountant in New Zealand. Eng joined Maze & Associates in 1986 upon graduation from USF and has been working primarily on school district and city audits. Eng is also very proficient in the use of Lotus 1-2-3 and has contributed significantly to our computer audit capability. Eng's municipal experience includes: City of Pinole Pinole Redevelopment Agency Tamalpais Union High School District South San Joaquin Irrigation District Sausalito School District Larkspur School District DEBBIE QUINN Debbie is a graduate of CSUS Hayward with a B.S. in Business, emphasis in Accounting. She is an Enrolled Agent with twelve years of experience in public accounting and was the Accounting Supervisor for the City of Pleasanton for two years. Debbie has passed the CPA examination and is awaiting her certificate. She has extensive governmental accounting and auditing spareness as well as considerable accounting services and tax experience. Her municipal audit experience includes: City of E1 Cerrito E1 Cerrito Redevelopment Agency East Bay Dischargers Authority East Bay Regional Park District San Francisco Bay Area Water Users Association Ora Loma Sanitary District -5- We are very conscious o -he need to maintain continuity _ personnel; the benefits of continuity accrue not only to our clients but to our staff and ourselves as well. At least two-thirds of this year's staff will return next year and the same will hold true the following year, barring unexpected resignations by the people on your work. At the same time, we will endeavor to add a new person each year so as to keep our perspective fresh and maintain the flow of new ideas. We are also interested in your reactions to our people and their approach to your work. OUR REFERENCES We are pleased to submit the following references and will furnish you with additional references if you wish. City of Manteca and Manteca Redevelopment Agency 1001 West Center Street Manteca, CA 95336 Contact person: Leticia Espinoza, Director of Finance (209) 239-8493 City of Pinole Pinole, CA 94547 Contact person: Joseph Meneghini, Assistant City Manager (415) 724-9000 Piedmont City Unified School District 760 Magnolia Avenue Piedmont, CA 94611 Contact person: Mike Bush, Business Manager (415) 420-3600 South San Joaquin Irrigation District 11011 East Highway 120 Manteca, CA 95336 Contact person: John Stein, Treasurer and Tax Collector (209) 823-3101 OUR APPROACH TO YOUR EXAMINATION General We will begin our work by meeting with you to discuss our audit plan. While the scope of our audit is a matter of professional judgement, with good communication and planning we can focus our work in areas of concern to you at no additional cost, simply by knowing your concerns and needs before we begin our work. We will meet with you again at the conclusion of our field work to review our draft Audit Report, Single Audit Report and Recommendations. We will integrate the work required under the Single Audit with our normal -- audit work and do both tests at one time. This approach reduces your cost and saves staff time. -6- I We will examine the gent—al purpose financial statements Vi the City of Dublin, as of June 30, 1988, 1989, 1990 and 1991, and for the years then ended. Our examination will be made in accordance with generally accepted auditing standards and, if applicable, the standards for financial and compliance audits contained in Standards for Audit of Governmental Organizations, Programs, Activities, and Functions, issued by the U.S. General Accounting Office, the Single Audit Act of 1984, and the provisions of the Compliance Supplement for Single Audits of State and Local Governments issued by the Office of Management and Budget. As part of our examination, we will study and evaluate the internal accounting and administrative controls and make such tests of transactions and records and perform such other auditing procedures as we consider necessary to enable us to determine whether: - the financial statements present fairly the financial position, results of operations and changes in financial position of enterprise funds in accordance with generally accepted accounting principles the City has complied with laws and regulations that may have a material effect on the financial statements and upon each major federal assistance program the City has accounting and administrative internal control systems to provide reasonable assurance that any federal programs are being managed in compliance with applicable laws and regulations. Internal Control Review Based upon the information collected during the planning stage and closing of your books, we will study and evaluate the systems of internal accounting and administrative control to determine the nature, timing and extent of the audit procedures necessary for expressing our opinion on the City's general purpose financial statements. For this purpose, we will classify your material internal accounting controls as those relating to: cash and investments, receivables, property and equipment, accounts payable, debt, _. revenues, expenditures and expenses, federal programs and budgetary appropriations. Having identified the controls, we will conduct tests to determine that these controls are being employed and your compliance with them. The results of these tests will form the basis for determining the nature, timing, and extent of our other auditing procedures. If necessary, we will also test internal accounting and administrative controls surrounding federal assistance programs. Our approach to satisfying the requirements of the Single Audit Act of 1984 as it relates to these programs is discussed below. Tests of Account Balances and Transactions We will test the assets, liabilities, fund equity, revenues, and expenditures of the various fund types and account groups on an individual fund basis, using analytical review, confirmation, recalculation, observation and other methods. We will work closely with you and provide you with formats so that as much analytical information as possible can be prepared by your staff. -7- Single Audit Act of 1984 The Single Audit Act of 1984 requires that we perform certain tests of any federal programs which reach prescribed levels of funding and expenditures. For any such programs, we must review internal accounting controls over cash and investments, receivables, property and equipment, accounts payable, revenues, expenditures, and budgetary appropriations. We must also identify and review the accounting and administrative controls used to conduct federal programs in general, and in particular, as they apply to specific federal assistance programs. We will identify the significant controls, review the actual controls in use, evaluate their adequacy as to design and test compliance with the control systems. Our compliance tests will determine whether (1) expenditures made were for allowable costs, (2) individuals and organizations receiving services or benefits were eligible to receive them, (3) matching fund requirements were met, and (4) financial reports and claims were in agreement with the books. We will review specific program compliance requirements and perform the audit procedures as stated in the OMB Compliance Supplement. The Single Audit Act also requires us to determine if the City has complied with laws and regulations that may have a material effect upon the financial statements. In this connection, our examination will extend into such areas as compliance with covenants of bond indentures, appropriation limits, and investment collateral security. Reports We will issue the reports listed below at the conclusion of our examination (including Single Audit Act reports, if applicable) . Pro-forma examples of each report are set forth in Appendix A. Report A - Auditor's report on examination of the general purpose financial statements of the Agency Report B - Auditor's report on the schedule of federal financial assistance Report C - Auditor's report on the study and evaluation of internal control systems Reports D and E - Auditor's reports on compliance We will also issue our Recommendations for improving accounting procedures and internal accounting and administrative controls. Unforeseen Conditions The primary purpose of our examination is to express an opinion on the City's financial statements. If unforeseen conditions are discovered which lead us to believe that material errors, defalcations other irregularities may exist, or if we encounter other circumstances which require extended services, we will promptly advise the City and we will not proceed without your agreement in advance. -S- COMPENSATION Our estimated hours and fees are set forth in detail below. Our fee of $19,940 -" represents the maximum we will bill for 1987-88 for the work described in our proposal. Partner Manager Supervisor Assistant Clerical Planning and supervision including review of accounting and administrative controls, council minutes budget and general financial activity. Preparation of -. audit programs 8 16 40 Test of transactions and account balances, detail compliance testing, confirmations and analyses of assets, liabilities, revenue and expenses of: 120 80 General fund Special revenue funds Capital projects funds Proprietary funds Fiduciary funds Fixed assets accounts Preparation of combined and combining financial statements, management letter, single audit compliance reports. 4 16 40 20 40 Review and client meetings 8 16 Totals 20 48 200 100 40 Hourly rates and total cost Hourly Total Rate Hours Cost Partner $120 20 $ 2,400 Manager 70 48 3,840 Senior 46 200 9,200 Assistant 35 100 3,500 Clerical 25 40 1.000 Total 408 $19.940 Our fees for future years are based on our understanding that there will be no material changes in the size of the City's operations, work force or financial statements. If any such changes do occur, we will review their impact with you before proceeding. -9- ADDITIONAL DATA We are in an unusual situation, one which we believe can benefit the City. As the firm which acquired the audit practice of Perry H. Carter, CPA, we have had the opportunity to meet and work with your staff during our Single Audit Act -- sub-contract work for Perry Carter. The staff we assigned to perform that work will continue on to complete your 1988 audit and Single Audit Act work. Thus, in a situation in which the City is selecting new accountants, our firm is already a known quantity. As a new firm, we take new approaches. We pride ourselves on adhering to the standards set by our profession. However, within those limits our basic philosophy is to help our client succeed. Our aim is to be a positive, productive factor in your environment. We will meet with you as soon as possible to identify your specific needs and concerns and we will respond to these as part of our audit plan. Our approach to auditing emphasizes finding practical, workable answers to the questions which arise out of an audit. We will work closely with you and your staff to minimize the impact of the audit process on their workload. To the extent possible, we will use accounting schedules and similar information you are already required to generate rather than requesting special schedules. Our approach to financial statement preparation emphasizes readability and communication of useful information. We focus on reducing technical accounting information to essentials which are understandable to the reader. We take a similar approach to making recommendations, looking for practical ideas which will improve controls where necessary without unduly increasing costs. We also look for potential cost-savings as we perform our work. We have developed a successful computerized approach to municipal auditing. We use our own Compaq portable computers, which we set up in your office. We have written our own programs for these computers, which allow us to input the information from your trial balances along with our audit adjustments. The information stored in our computer programs is used along with our word processing capabilities to produce your financial statements directly in final draft for your review. This approach reduces our turnaround time and your cost by eliminating manual drafting and typing of the financial statements. In summary, we offer a combination of the best of the old and the new. We are a new firm, but we have much experience with municipal and special district audit work. We have a new approach to performing the work you need, but our approach is based on experience and it has already been tested and proven. We fulfill your traditional audit requirements, but we approach your work with a new, more personal and more positive perspective. We look forward to working with you! Maze & Associates -10- ppendix A Wage 1 Report A Auditor's Report on Examination of the General Purpose Financial Statements We have examined the general purpose financial statements of the City of Dublin as of and for the year ended June 30, 1988 as listed in the Table of Contents as Exhibits through . Our examination was made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the general purpose financial statements referred to above present fairly the financial position of the City of Dublin at June 30, 1988 and the results of its operations and the changes in financial position of its proprietary fund types for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Our examination was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The combining, individual fund, and individual account group financial statements and schedules listed in the Table of Contents are presented for purposes of additional analysis and are not a required part of the general purpose financial statements of the City of Dublin. Such information has been subjected to the auditing procedures applied in the examination of the general purpose financial statements and, in our opinion, are fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. Appendix A Page 2 Report B Auditor's Report on Supplementary Information Schedule of Federal Financial Assistance We have examined the general purpose financial statements of the City of Dublin for the year ended June 30, 1988 and have issued our report thereon dated . Our examination of such general purpose financial statements was made in accordance with generally accepted auditing standards and the standards for financial and compliance audits contained in the Standards for Audit of Governmental Organizations, Programs, Activities, and Functions, issued by the U.S. General Accounting Office, and accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. Our examination was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The accompanying Schedule of Federal Financial Assistance is presented for purposes of additional analysis and is not a required part of the general purpose financial statements. The information in that schedule has been subjected to the auditing procedures applied in the examination of the general purpose financial statements and in our opinion is fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. Appendix A Page 3 Report C Auditor's Report on Internal Controls (Accounting and Administrative) Based on a Study and Evaluation Made as a Part of an Examination of the General Purpose Financial Statements and the Additional Tests Required by the Single Audit Act We have examined the general purpose financial statements of the City of Dublin for the year ended June 30, 1988 and have issued our report thereon dated . As part of our examination, we made a study of the internal control systems, including applicable internal administrative controls, used in administering federal financial assistance programs to the extent we considered necessary to .evaluate the systems as required by generally accepted auditing standards, the standards for financial and compliance audits contained in the Standards for Audit of Governmental Organizations, Programs, Activities, and Functions, issued by the U.S. General Accounting Office, The Single Audit Act of 1984, and the provisions of OMB Circular A-128, Audits of State and Local Governments. For the purpose of this report, we have classified the significant internal accounting and administrative controls used in administering federal financial assistance programs in the following categories: cash and investments, receivables, property and equipment, accounts payable, debt, revenues, expenditures and expenses, non-major federal programs and budgetary appropriations. The management of the City of Dublin is responsible for establishing and maintaining internal control systems used in administering federal financial assistance programs. In fulfilling that responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control systems used in administering federal financial assistance programs are to provide management with reasonable, but not absolute, assurance that, with respect to federal financial assistance programs, resource use is consistent with laws, regulations, and policies; resources are safeguarded against waste, loss, and misuse; and reliable data are obtained, maintained, and fairly disclosed in reports. Because of inherent limitations in any system of internal accounting and administrative controls used in administering federal financial assistance programs, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the systems to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the degree of compliance with the procedures may deteriorate. pendix A rage 4 Our study included all of the applicable control categories listed above. During the year ended June 30, 1988 the City of Dublin had no major federal financial assistance programs and expended % of its total federal financial assistance under the following non-major federal financial assistance programs: With respect to internal control systems used in administering these non-major federal financial assistance programs, our study and evaluation included considering the types of errors and irregularities that could occur, determining the internal control procedures that should prevent or detect such errors and irregularities, determining whether the necessary procedures are prescribed and are being followed satisfactorily, and evaluating any weaknesses. With respect to the internal control systems used solely in administering the other non-major federal financial assistance programs of the City of Dublin, our study and evaluation was limited to a preliminary review of the systems to obtain an understanding of the control environment and the flow of transactions through the accounting system. Our study and evaluation of the internal control systems used solely in administering the non-major federal financial assistance programs of the City of Dublin did not extend beyond this preliminary review phase. Our study and evaluation was more limited than would be necessary to express an opinion on the internal control systems used in administering the federal financial assistance programs of the City of Dublin. Also, our examination, made in accordance with the standards mentioned above, would not necessarily disclose material weaknesses in the internal control systems, for which our study and evaluation was limited to a preliminary review of the systems, as discussed in the fifth paragraph of this report. However, our study and evaluation and our examination disclosed no condition that we believe to a material weakness in relation to a federal financial assistance program of the City of Dublin. This report is intended solely for the use of management and the [name of regulatory agency (ies) ] and should not be used for any other purpose. This restriction is not intended to limit the distribution of this report, which, upon acceptance by the City of Dublin, is a matter of public record. Appendix A Page 5 Report D Auditor's Report on Compliance with Laws and Regulations Related to Non-major Federal Financial Assistance Programs in Circumstances in which the Recipient Received No Major Program Funding We have examined the general purpose financial statements of the City of Dublin for the year ended June 30, 1988 and have issued our report thereon dated Our examination was made in accordance with generally accepted auditing standards; the standards for financial and compliance audits contained in the Standards for Audit of Governmental Organizations, Programs, Activities, and Functions, issued by the U.S. General Accounting Office; The Single Audit Act of 1984, and the provisions of OMB Circular A-128, Audits of State and Local Governments, and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The management of the City of Dublin is responsible for the Agency's compliance with laws and regulations. In connection with the examination referred to above, we selected and tested transactions and records from non-major federal financial assistance programs to determine the Agency's compliance with laws and regulation noncompliance with which we believe could have a material effect on the allowability of the program expenditures. The results of our tests indicate that for the transactions and records tested the the City of Dublin complied with the laws and regulations referred to above, (except as described in the accompanying schedule of findings and questioned costs) . Our testing was more limited than would be necessary to express an opinion on whether the the City of Dublin administered those programs in compliance in all material respects with those laws and regulation noncompliance with which we believe could have a material effect on the allowability of program expenditures; however, with respect to the transactions and records that were not tested by us, nothing came to our attention to indicate that the the City of Dublin -has violated laws and regulations (other than those laws and regulations for which we noted violations in our testing referred to above) . ,I Apy Lx A Page o Report E Auditor's Report on Compliance with Laws and Regulations Related to Standards for Audit Issued by the U.S. General Accounting Office We have examined the general purpose financial statements for the the City of Dublin for the year ended June 30, 1988 and have issued our report dated Our examination was made in accordance with generally accepted auditing standards and the standards for financial and compliance audits contained in the Standards for Audit of Governmental Organizations, Programs, Activities, and Functions, issued by the U.S. General Accounting Office, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The management of the City of Dublin is responsible for the Agency's compliance with laws and regulations. In connection with our examination referred to above, we selected and tested transactions and records to _ determine the Agency's compliance with laws and regulations noncompliance with which could have a material effect on the general purpose financial statements of the Agency. The results or our tests indicate that for the items tested, the the City of Dublin complied with those provisions of laws and regulations noncompliance with which could have a material effect on the general purpose financial statements. Nothing came to our attention that caused us to believe that for the items not tested the the City of Dublin was not in compliance with laws or regulations noncompliance with which could have a material effect on the Agency's general purpose financial statements.