CITY OF COCOA BEACH REQUIRED AUDITOR COMMUNICATIONS FISCAL YEAR ENDED SEPTEMBER 30, 2015, Presented by: Dan O Keefe, CPA, MBA, CFE

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1 CITY OF COCOA BEACH REQUIRED AUDITOR COMMUNICATIONS FISCAL YEAR ENDED SEPTEMBER 30, 2015, Presented by: Dan O Keefe, CPA, MBA, CFE

2 Team Members Present Dan O Keefe Moore Stephens Lovelace Matthew Trine Davies, Houser & Secrest Dawn Fearon Davies, Houser & Secrest 2

3 AUDIT OVERVIEW 3

4 Required Communications Services and Deliverables Other Reports Manager Responsibilities Auditor Responsibilities Internal Controls Compliance Communication of Significant Matters Risk-based Audit Approach Accounting and Auditing Items 4

5 Required Communications Continued Management Representations Assigned Individuals Audit Schedule Conclusion 5

6 Services and Deliverables Engaged to audit the City s financial statements for the year ended September 30, Issued an opinion as to whether or not the City s financial statements are presented fairly, in all material respects, in conformity with GAAP (Page 3) 6

7 Other Reports Report on Internal Control Over Financial Reporting and on Compliance and Other Matters (Page 127) Report on Compliance for Each Major State Project and on Internal Control over Compliance and Report on Schedule of Expenditures of State Financial Assistance (Page 129) Schedule of Findings and Questioned Costs (Page 135) Management Letter (Page 137) Independent Accountant s Report (Page 141) 7

8 Management Responsibilities Management Responsibilities include: Establishing and maintaining internal controls, including monitoring Select and applying appropriate accounting and reporting principles Making all financial records and related information available to us Disclosing any related parties 8

9 Management Responsibilities Continued Adjusting the financial statements for material misstatement Designing and implement programs to prevent and detect fraud Informing us of any known or suspected fraud or illegal allegations of same without regard to materiality Establishing and maintaining a process to track and correct any current or prior audit findings. 9

10 Auditor Responsibilities Auditor Responsibilities include: Performed our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, OMB Circular A-133, the Chapter Rules of the Auditor General These standards are designed to provide reasonable, but not absolute, assurance that the financial statements and federal and state grants tested are free of material misstatement. 10

11 Internal Controls We considered the City s internal controls over financial reporting as a basis for designing our audit procedures. We did not express an opinion on the effectiveness of the City s internal controls. We performed specific tests of controls over federal and state grants. 11

12 Compliance We performed tests of the City s compliance with laws, regulations, contracts and grant agreements. For federal and state single audit purposes, we also performed tests of transactions for the types of compliance requirements that could have a direct and material effect on the City s major federal programs and state projects. 12

13 Communication of Significant Matters There were no significant audit adjustments made during the course of the audit. There were no unreported or unadjusted differences. We had no disagreements with management. As far as we know, management did not receive opinions from other accountants. 13

14 Risk-Based Audit Approach A Risk-Based Audit Approach requires the use of our professional judgment in determining materiality and audit areas of significance. Our procedures included: Testing transactions on a sample basis Verifying account balances we deemed significant Analysis of relevant controls Inquiry Analytics Other procedures we deemed necessary 14

15 Accounting and Auditing Items GASB 68 Accounting and Financial Reporting for Pensions an amendment of GASB No. 27 Effective for FYE 2015 GASB 69 Government Combinations and Disposals of Government Operations Effective for FYE 2015 GASB 71 Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68. Effective for FYE 2015 GASB 72 Fair Value Measurement and Application. Effective for FYE

16 Accounting and Auditing Items continued GASB 73 Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. Effective for FYE 2016 and 2017 GASB 74 Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. Effective for FYE 2017 GASB 75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions Effective for FYE 2018 GASB 76 The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. Effective for FYE

17 Management Representations We obtained certain representations from management including: Records provided complete No communications from regulatory agencies concerning noncompliance Responsible for internal controls No knowledge of fraud or suspected fraud Financial statements complete Complied with contractual obligations Matters pertaining to federal and state grants 17

18 Assigned Individuals The City identified Charles Holland as the management-level individual to oversee our work and take responsibility for the City s financial statements. Our Team was made up of: Governmental Specialists IT Specialists MSL/DHS 18

19 Audit Schedule Audit Stage Dates Interim fieldwork October 2015 Year-end fieldwork Review of Financial Statements (CAFR) Presentation to City Commission Submission of CAFR to GFOA December 2015/January 2016 February 2016 March 2016 March 2016 Submission to State March

20 FINANCIAL ANALYSIS 20

21 Differences Between Government and Commercial Standard-setting bodies Financial reporting Basis of accounting Government Governmental Accounting Standards Board (GASB) Use of funds, budgetary, top level reporting, MD&A, RSI, CAFR Full accrual - proprietary Modified accrual governmental funds Commercial Financial Accounting Standards Board (FASB) Single-statement presentation Full accrual Reporting units Multiple Single Audit standards AICPA ASB, GAO, OMB A-133, Auditor General AICPA ASB Budgets Required Optional 21

22 Key Terms Expenditure (applied against current financial resources) vs. Expense (when incurred) Capital, principal payments on debt, etc. Revenue (when available) vs. Income (when earned) Governmental funds (modified accrual) Proprietary funds (full accrual) Pension trust funds (full accrual) 22

23 Reporting Units Basic Financial Statements: Government-wide Governmental activities Business-type activities Fund Financial Statements Major funds Aggregate non-major funds Budgetary Statements 23

24 Affect on Statement of Net Position for the Net Pension Liability Affects Accrual Basis Financial Statements (Opinion Units) Governmental Total Business- Note A. 15 (CAFR page 50) Activities Utility Fund Stormwater Type Activities Net position as previously reported $ 26,522,673 $ 30,434,692 $ 3,770,627 $ 34,205,319 Beginning Net position as restated 19,008,901 30,574,385 3,791,219 34,365,604 Adjustment October 1, 2014 (reduction) $ (7,513,772) $ 139,693 $ 20,592 $ 160,285 Net Pension Liability, $ 9,606,695 $ 174,866 $ 25,779 $ 200,645 Deferred Outflows of Resources, (2,517,843) (367,528) (54,182) (421,710) Deferred Inflows of Resources, ,531 19,943 2,940 22,883 Less Prepaid Contributions, (202,559) Net reduction to Unrestricted Net Position $ 7,086,824 $ (172,719) $ (25,463) $ (198,182) Net Position Investment in Capital Assets $ 22,249,281 $ 21,222,876 3,120,589 $ 24,343,465 Restricted Net Position 864,117 1,029,297-1,029,297 Unrestricted Net Position (3,923,940) 7,869, ,741 8,857,119 Total Net Position $ 19,189,458 $ 30,121,551 $ 4,108,330 $ 34,229,881 24

25 Top Level Analysis (Pages 21-23) Governmental Activities Business-type Activities Current Ratio (excludes internal accounts) Total Assets $34.9M $58.9M Total Liabilities $3.5M $24.6M Total Net Assets Invested in Capital Assets Restricted Unrestricted $22.2M.9M (3.9M) $29.0M 1.0M 8.9M Unrestricted NA as a % of Total Expenses.18% % Change in Net Assets ($.181M) ($.135M) 25

26 Fund Financial Statements (Pages 24-39) Major Funds: Governmental: General Fund Community Redevelopment Agency (CRA) Proprietary: Utility System Stormwater Fiduciary Funds: OPEB Trust Pension Trust Funds (General Employees, Police & Fire) 26

27 General Fund (Pages 24-29) Total Assets $8.0M Total Liabilities 2.2M Fund Balance: Non-spendable Restricted Committed Unassigned $2.2M 0.6M 0.4M 4.5M Unassigned FB as a % of Total Expenditures 19.3% Net Change in Fund Balance ($3.0M) 27

28 General Fund Budget (Pages 28-29) Budget Actual Variance Resources: Beginning Fund Balance $ 8.8M $ 8.8M Total Revenues 18.9M 19.6M $.7M Total Resources 27.7M 28.4M Total Expenditures 25.6M 23.4M 2.2M Excess Resources over Expenditures 2.1M 5.0M 2.9M Other Financing Sources.8M.8M Ending Fund Balance $2.9M $ 5.8M $2.9M 28

29 Proprietary Funds (Pages 32-37) Utility Stormwater Total Assets and Deferred Outflows $55.1M $4.9M Total Liabilities and Deferred Inflows 25.0M.8M Net Assets: Invested in Capital Assets, Net $23.2M $2.9M Restricted.8M Unrestricted 7.3M.8M Total Net Assets $31.3M $3.7M Total Revenues $ 5.8M $.6M Total Expenses 5.6M.4M Operating Income $.2M $.1M 29

30 Questions or Comments We re looking out for you! 30