Municipality of Parkersburg, West Virginia

Transcription

1 Municipality of Parkersburg, West Virginia Report to the Governing Body February 6, 2018

2 February 6, 2018 Honorable Mayor and Council of the Municipality of Parkersburg Parkersburg, West Virginia We are pleased to present this report related to our audit of the financial statements of the Municipality of Parkersburg, West Virginia (the Municipality) for the year ended June 30, This report summarizes certain matters required by professional standards to be communicated to you in your oversight responsibility for the Municipality s financial reporting processes. This report is intended solely for the information and use of the Mayor, City Council, and Federal and State oversight agencies and is not intended to be and should not be used by anyone other than these specified parties. It will be our pleasure to respond to any questions you have regarding this report. We appreciate the opportunity to continue to be of service to the Municipality. Suttle & Stalnaker, PLLC Charleston, West Virginia The Virginia Center 1411 Virginia Street, East Suite 100 Charleston, WV Phone (304) or 1(800) Fax (304) Wharf District 68 Clay Street Suite C Morgantown, WV Phone (304) Fax (304) Towne Square 201 Third Street PO Box 149 Parkersburg, WV Phone (304) Fax (304) cpa@suttlecpas.com A Professional Limited Liability Company

3 Contents Page Required Communications 4-6 Summary of Accounting Estimates 7 Summary of Recorded Audit Adjustments 8 Summary of Uncorrected Misstatements 9-10 Communication Regarding Significant Deficiencies and/or Material Weaknesses Certain Written Communications Between Management and Our Firm 15 Engagement Letter Management Representation Letter

4 4 Required Communications Professional standards require the auditor to communicate certain matters to keep those charged with governance adequately informed about matters related to the financial statement audit that are, in our professional judgment, significant and relevant to the responsibilities of those charged with governance in overseeing the financial reporting process. The following summarizes these communications. Area Auditor s Responsibility Under Professional Standards Qualitative Aspects of Accounting Practices Comments We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the Municipality of Parkersburg (the Municipality) for the year ended June 30, Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated July 28, Adoption of, or Change in, Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Municipality are described in Note I to the financial statements. As described in Note VIII to the financial statements, the Municipality adopted Governmental Accounting Standards Board (GASB) Statements which had no significant impact on the financial statements. We noted no transactions entered into by the Municipality during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Management s Judgments and Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements are summarized in the attached Summary of Accounting Estimates. Financial Statement Disclosures The financial statement disclosures are neutral, consistent, and clear.

5 5 Area Difficulties Encountered in Performing the Audit Corrected and Uncorrected Misstatements Disagreements with Management Management Representations Management Consultations with Other Independent Accountants Other Audit Findings or Issues Certain Written Communications Between Management and Our Firm Comments We encountered no significant difficulties in dealing with management in performing and completing our audit. Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. See the attached Summary of Recorded Audit Adjustments and Summary of Uncorrected Misstatements. For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor s report. We are pleased to report that no such disagreements arose during the course of our audit. We have requested certain representations from management that are included in the management representation letter dated February 6, In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a second opinion on certain situations. If a consultation involves application of an accounting principle to the Municipality s financial statements or a determination of the type of auditor s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Municipality s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Copies of certain written communications between our firm and the management of the Municipality are attached as exhibits.

6 6 Area Other Matters Comments We applied certain limited procedures to the Schedules of Changes in the Net Pension Liability and Related Ratios, Schedules of Investment Returns, Schedules of Contributions, Schedule of the Government's Proportionate Share of the Net Pension Liability, Schedule of Government Contributions, and the Notes to Schedules, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on Schedule of Expenditures of Federal Awards and the combining and individual nonmajor fund financial statements, which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.

7 Municipality of Parkersburg Summary of Accounting Estimates Year Ended June 30, Accounting estimates are an integral part of the preparation of financial statements prepared by management and are based upon management s current judgment. The process used by management encompasses its knowledge and experience about past and current events and certain assumptions about future events. You may wish to monitor throughout the year the process used to compute and record these accounting estimates. The following describes the significant accounting estimates reflected in the Municipality s June 30, 2017 financial statements: Area Accounting Policy Estimation Process Comments Depreciation of Capital Assets Valuation of Receivables Straight line method Net realizable value Based on cost or estimated cost, or if contributed, at fair value of the asset. Depreciation is calculated using the straightline method over the estimated useful life. Review of net amounts of anticipated collections, established grants, contracts, and historical collection information. Investments Fair value Based on quoted market prices as provided by the third party custodians or market prices of assets held at the Municipality. See Note D.1. for additional information. Compensated Absences Unearned Revenue Estimated Estimated Accumulated in accordance with disclosure at Note I.D.5. Amounts due within one year are recorded on the fund statements and amounts due after one year are recorded on the government wide statements. Revenue is recognized as the time constraints are satisfied. OPEB Liability Estimated Based upon the third-party trust funds actuarial determination of the annual required contribution which is billed to the Board. Net Pension Liability Estimated Based upon the third-party actuarial determination. Claims Liability Estimated Based on claim liability through December 31, 2016 plus prospective 2017 liabilities as provided by the West Virginia Offices of the Insurance Commissioner. We concur with this process. We concur with this process. We concur with this process. We concur with this process. We concur with this process. We concur with this process. We concur with this process. We concur with this process.

8 Municipality of Parkersburg Summary of Recorded Audit Adjustments Year Ended June 30, During the course of an audit, we accumulate adjustments that are determined by management to be material to the financial statements and to the related financial statement disclosures, or management otherwise determines are appropriate to make. Following is a summary of the adjustments made to the original trial balance we received. Fund Financial Statement Entries There were no fund level audit adjustments identified during the course of our audit. Government-Wide Financial Statement Entries Account Description Debit Credit Adjusting Journal Entries JE # 31 To restate prior year for worker's comp claim liability Net Position Beginning 694, Claims Liability - 694, Total 694, ,815.00

9 Municipality of Parkersburg Summary of Uncorrected Misstatements Year Ended June 30, During the course of an audit, we accumulate uncorrected misstatements that are determined by management to be immaterial, both individually and in the aggregate, to the financial statements and to the related financial statement disclosures. Following is a summary of those differences. Fund Financial Statement Entries Account Description Debit Credit Proposed JE # 9 To adjust current depreciation for memorial bridge additions ACCUM. DEPRECIATION 15, DEPRECIATION EXPENSE - 15, Total 15, , Proposed JE # 21 To adjust accrued payroll to actual SALARIES & WAGES 8, SALARIES & WAGES PAYABLE - 8, Total 8, , Government-Wide Financial Statement Entries Account Description Debit Credit Proposed JE # 22 To correct 2017 depreciation Accumulated Depreciation 32, Health and Sanitation 17, General Government - 2, Public Safety - 13, Streets and Transportation - 33, Total 49, ,778.00

10 Municipality of Parkersburg Summary of Uncorrected Misstatements Year Ended June 30, Account Description Debit Credit Proposed JE # 28 To propose a correction for the Fire Pension 2014 deferred outflows related to investment experience. DBP Deferred Outflow - Changes in Actual Investment Experience 68, Public Safety 68, Net Position Beginning - 137, Total 137, , Proposed JE # 29 To propose a correction for the Police Pension 2014 Deferred Inflow related to investment experience Net Position Beginning 223, DBP Deferred Inflow - Changes in Actual Investment Experience - 111, Public Safety - 111, Total 223, ,298.00

11 COMMUNICATION REGARDING SIGNIFICANT DEFICIENCIES AND/OR MATERIAL WEAKNESSES 11

12 12 February 6, 2018 To the Honorable Mayor and Council Of the Municipality of Parkersburg Parkersburg, West Virginia In planning and performing our audit of the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the Municipality of Parkersburg, West Virginia (the Municipality) as of and for the year ended June 30, 2017, in accordance with auditing standards generally accepted in the United States of America, we considered the Municipality s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Municipality s internal control. Accordingly, we do not express an opinion on the effectiveness of the Municipality s internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore material weaknesses or significant deficiencies may exist that were not identified. In addition, because of inherent limitations in internal control, including the possibility of management override of controls, misstatements due to error or fraud may occur and not be detected by such controls. However, as discussed below, we identified certain deficiencies in internal control that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected, on a timely basis. We consider the following deficiency in internal control to be a material weakness: Claims Liability Accounting principles generally accepted in the United States of America (GAAP) requires governments to report an estimated loss from a claim that is probably and reasonably estimable as an expense and as a liability in the government-wide financial statements using the economic resources measurement focus and accrual basis of accounting. It was determined during our examination that the Municipality of Parkersburg did not record a liability for the self-funded worker s compensation claims incurred as of June 30, 2016 or This resulted in the prior year s liabilities being understated by approximately $695,000. We would recommend that as part of the closing book procedures management of the Municipality evaluate any additional claims or judgements that have been asserted and for which the probable loss is reasonably estimable. The Virginia Center 1411 Virginia Street, East Suite 100 Charleston, WV Phone (304) or 1(800) Fax (304) Wharf District 68 Clay Street Suite C Morgantown, WV Phone (304) Fax (304) Towne Square 201 Third Street PO Box 149 Parkersburg, WV Phone (304) Fax (304) cpa@suttlecpas.com A Professional Limited Liability Company

13 13 A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the following deficiency in internal control to be a significant deficiency: Reporting Code of Federal Regulations 24 CFR states in part that "...3) HUD shall determine the frequency of the Federal Financial Reporting for each project or program, considering the size and complexity of the particular project or program. However, the report wilt not be required more frequently than quarterly or less frequently than annually. The reporting period end dates shall be March 31, June 30, September 30 or December 31. A final FFR shall be required at the completion of the award agreement and shall use the end date of the project or grant period as the reporting end date. (4) HUD requires recipients to submit the FFR (original and two copies), not later than 30 days after the end of each specified reporting period for quarterly and semiannual reports and 90 days for annual reports." The Municipal Officials did not comply with all the reporting requirements as stipulated for the federal award. Specially, the grant administration employees failed to include activity from all active grants on the Form SF-425 reports. We would recommend that the Municipal Officials should thoroughly review the instructions for properly filing Form SF-425 and comply with the federal requirements therein. During our audit, we became aware of the following deficiencies in internal control other than significant deficiencies or material weaknesses and other matters that are opportunities for strengthening internal controls and operating efficiency. Capital Assets During testing of capital assets, the following items were noted: Certain land on the books had no detail of the properties owned and their associated historical costs, Certain disposals removed during 2017 had their full value removed from accumulated depreciation rather than just the amount accumulated up to the point of disposal, Equipment added to vehicles purchased during 2017 was not included on the depreciation schedule, Certain additions to the bridge were being depreciated as of June 30, 2017 but should have been recorded as construction in process, The depreciation schedule does not have a progression of accumulated depreciation for each asset and therefore it cannot be easily tied to the government wide financial statements. We would recommend that management revisit the capital asset recordkeeping for any changes need in processes and procedures as well as to evaluate any adjustments that may be needed in fiscal Segregation of Duties - Payroll During payroll testing, it was noted that the in two separate instances an employee approved their own time prior to payroll being released. In one instance the time would have had a final approval by human resources prior to its release but in the other, there was no additional approval. We would recommend that all employees have a secondary approval on their time prior to payroll being released to ensure proper reporting and payment. This issued should be partially resolved in 2018 with the hiring of a new payroll clerk.

14 14 Deferred Inflows/Outflows Police and Fire Pensions The deferred inflows/outflows related to investment experience for the Police and Fire pension plans that were booked as part of the initial adoption of GASB 67/68 were not properly reported and amortized in prior years. The impact on the current year financial statements was not material for adjustment and 2017 was the last year it would be reported. We would recommend that management work with their auditors on the upcoming implementation of GASB 75 for Other Post-Employment Benefits to ensure a similar error does not occur. Code Officers Management was unable to provide documentation proving that the Community Development Block Grant (CDBG) code officers are only working in deteriorated areas as required in order to use CDBG funds. We recommend that management begin to maintain documentation regarding where the officers are working as well as descriptions on file indicating the areas they are working meet the local or state law definition of deteriorating/deteriorated areas. * * * * * We will review the status of these comments during our next audit engagement. We have already discussed these comments and suggestions with various Municipality personnel, and we will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. This communication is intended solely for the information and use of the Mayor and members of the City Council and is not intended to be and should not be used by anyone other than these specified parties. Charleston, West Virginia February 6, 2018

15 15 Certain Written Communications Between Management and Our Firm Engagement Letter Management Representation Letter

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