La Mesa, California Single Audit Report on Federal Awards
Single Audit Report on Federal Awards Year ended June 30, 2012 TABLE OF CONTENTS Page Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 1 Independent Auditor s Report on Compliance with Requirements that Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 3 Schedule of Expenditures of Federal Awards 6 Notes to the Schedule of Expenditures of Federal Awards 8 Schedule of Findings and Questioned Costs 9 Summary Schedule of Prior Audit Findings 12 Corrective Action Plan 14
ROGERS. ANDERSON, MALODY & SCOTT. LLP CERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 735 E. Carnegie D r. Suite I 00 San Bernardino. CA 92408 909 889 0871 T 9098895361 F r amscpa. net PARTNERS Br enda l. Odie. CPA. MST Ter..-y P. Shea. CPA Kirk A Franks. CPA Matthew B. W ilson. CPA. MSA Scott W. Manno. CPA Leena Shanbhag. CPA. MST Jay H. Zercher. CPA (Retired) Phillip H. Waller. CPA (Retired) MANAGERS I STAFF Nancy O'Rafferty, CPA. MBA Br adfer d A Welebir, CPA. MBA Jenny Liu. CPA. MST Katie l. Millsom. CPA Papa Matar Thiaw, CPA. MBA Maya S. lvanova. CPA. MBA William C. Clayton. CPA Peter E. Mur-ray. CPA Genivive Schwarzkopf, CPA M egan Hackney. CPA Seong-Hyea lee. CPA. MBA Charles De Simoni. CPA To the Honorable Mayor and Members of City Council of the City of La Mesa La Mesa, California REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 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 La Mesa, California (the City), as of and for the year ended June 30, 2012, which collectively comprise the City's basic financial statements and have issued our report thereon dated December 27, 2012. 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. Internal Control Over Financial Reporting Management of the City is responsible for establishing and maintaining effective 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. MEMBERS American Institute of Certified Public Accountants PCPS The A/CPA Alliance for CPA F~rms Governmental Audit Qua/J ty Center California Society of Certified Public Accountants 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. 1 STABILITY. ACCURACY. TRUST.
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be a material weakness, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of management, the City Council, others within the entity, federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. December 27, 2012 2
ROGERS, ANDERSON, MALODY & SCOTT, LLP C ERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 735 E. Carnegie Dr. Su ite I 00 San Bernardino. CA 92408 909 889 0871 T 909 889 5361 F r amscpa.net To the Honorable Mayor and Members of City Council of the City of La Mesa La Mesa, California PARTNERS Br enda L. Odie. CPA. MST Terry P. Shea. CPA Kirk A Franks. CPA Matthew B. Wilson. CPA. MSA Scott W. Manno. CPA Leena Shanbhag. CPA. MST Jay H. Zercher. CPA (Retired) Phillip H. Waller. CPA (Retired) MANAGERS I STAFF Nancy O'Raffer-ty. CPA. MBA Br ad ferd A Welebir. CPA. MBA Jenny Liu, CPA. MST Katie L. Millsom. CPA Papa Matar Thiaw. CPA. MBA MayaS. lvanova. CPA. MBA William C. Clayton. CPA Peter E. Murray. CPA Genivive Schwarzkopf, CPA Megan Hackney. CPA Seong-Hyea Lee. CPA. MBA Charles De Simoni. CPA INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Compliance We have audited the City of La Mesa's (the City) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the City's major federal programs for the year ended June 30, 2012. The City's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of 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. MEMBERS Arner-ican Institute of Certified Public Accountants PCPS The A/CPA Alliance for CPA Flfms Governmental Audrt Qualrty Center California Society of Certified Public Accountants We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit 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 item 2012-1 in the accompanying schedule of findings and questioned costs, the City did not comply with requirements regarding eligibility that are applicable to its HOME Investments Partnership Program. Compliance with such requirements is necessary, in our opinion, for the City to comply with the requirements applicable to that program. 3 STABI LITY. ACCURACY. TRUST.
In our opinion, except for the noncompliance described in the preceding paragraph, the City complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2012 Internal Control over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the 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 to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, we identified a deficiency in internal control over compliance that we consider to be a significant deficiency as described in the accompanying schedule of findings and questioned costs as item 2012-1. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. 4
Schedule of Expenditures of Federal Awards 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 as of and for the year ended June 30, 2012, and have issued our report thereon dated December 27, 2012, which contained an unqualified opinion on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133, and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the financial statements as a whole. The City s response to the finding identified in our audit are described in the accompanying schedule of findings and questioned costs. We did not audit the City s response and, accordingly, we express no opinion on the response. This report is intended solely for the information and use of management, the City Council, others within the entity, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. February 6, 2013 (except for the Schedule of Expenditures of Federal Awards, as to which the date is December 27, 2012.) 5
Schedule of Expenditures of Federal Awards Federal Grantor/Pass-through Grantor/Program Title Federal CFDA Number Agency or Pass-Through Number FY 2011/2012 Federal Expenditures Amounts paid to subrecipients U.S. Department of Housing and Urban Development Direct Program Community Development Block Grant 14.218 B-09-MC-06-0551 $ 25,372 $ 5,000 Community Development Block Grant 14.218 B-10-MC-06-0551 475,913 53,750 Community Development Block Grant 14.218 B-11-MC-06-0551 115,447 - Community Development Block Grant 14.218 Program Income 26,301 - Total CFDA 14.218 643,033 58,750 ARRA CDBG-R 14.253-R Unknown 9,592 - Total CFDA 14.253-R 9,592 - Passed through the County of San Diego HOME Program 14.239 Unknown 566,009 - Total CFDA 14.239 566,009 Total U.S. Department of Housing and Urban Development 1,218,634 58,750 U.S. Department of Justice Passed through the County of San Diego Sheriff's Department Gang Enforcement Collabrative 16.753 Unknown 11,677 - Total CFDA 16.753 11,677 - Passed through the County of San Diego Sheriff's Department Project Safe Neighborhoods 16.609 Unknown 3,782 - Total CFDA 16.609 3,782 - Edward Byrne Memorial Justice Assistance Grant 16.738 Unknown - - Total CFDA 16.738 - Total U.S. Department of Justice 15,459 - U.S. Department of Transportation Passed through State Department of Transportation Highway Safety Improvement Program 20.205-R HSIPL-5207(033) 4,514-20.205-R HSIPL-5207(031) 19,097-20.205-R SRTSLNI-5207 (030) - - ARRA-Safe Routes to School 20.205-R SRTSLNI-5207 (030) 10,900-20.205-R RPSTPLE-5207 (025) 267-20.205-R SRTSLNI-5207 (029) 75,246 - Total CFDA 20.205-R 110,024 - Passed through San Diego Association of Governments (SANDAG) Federal Transit Administration 20.521 5001083 126,765 - R4N--New Freedom Grant - - Total CFDA 20.521 126,765 - National Traffic Safety Administration 20.600 AL0939 12,771 - Total CFDA 20.600 12,771 - Total U.S. Department of Transportation 249,560 - U.S. Department of Energy Direct Program ARRA-Energy Efficiency and Conservation Block Grant 81.128-R Unknown 291,383 - Total CFDA 81.128-R 291,383 - Total U.S. Department of Energy 291,383 - Department of Health and Human Services Centers for Disease Control and Prevention Passed through the County of San Diego and SANDAG 93.724-R 5001666 45,628 - ARRA--Communities Putting Prevention to Work 93.724-R 5001672 9,650-93.724-R 5001660 40,568-93.724-R 5001655 69,335-93.724-R Unknown 6,826 - Total CFDA 93.724-R 172,007 - Total Federal Centers for Disease Control and Prevention 172,007-6
Schedule of Expenditures of Federal Awards, continued Federal Grantor/Pass-through Grantor/Program Title Federal CFDA Number Agency or Pass-Through Number FY 2011/2012 Federal Expenditures Amounts paid to subrecipients U.S. Department of Homeland Security Passed through the City of San Diego FY 10 Urban Area Security Initiative Grant 97.008 City of San Diego 9,662 - Total CFDA 97.008 9,662 - Assistance to Firefighters Grant 97.044 FEMA - - Total CFDA 97.044 - - Direct Program State Homeland Security Grant 10 97.067 CalEMA 36,952 - State Homeland Security Grant 11 97.067 CalEMA - - Operation Stonegarden Grant 97.067 CalEMA 216,517 - Total CFDA 97.067 253,469 Total U.S. Department of Homeland Security 263,131 - Total Expenditures of Federal Awards $ 2,210,174 $ 58,750 7
Notes to the Schedule of Expenditures of Federal Awards (1) Summary of Significant Accounting Policies Applicable to the Schedule of Expenditures of Federal Awards (a) Scope of Presentation The accompanying schedule presents only the expenditures incurred by the City of La Mesa that are reimbursable under federal programs of federal awards. For the purposes of this schedule, federal awards include both federal awards received directly from a federal agency, as well as federal funds received indirectly by the City from a non-federal agency or other organization. Only the portion of program expenditures reimbursable with such federal funds are reported in the accompanying schedule. Program expenditures in excess of the maximum federal reimbursement authorized or the portion of the program expenditures that were funded with state, local or other non-federal funds are excluded from the accompanying schedule. (b) Basis of Accounting The expenditures included in the accompanying schedule were reported on the modified accrual basis of accounting. Under the modified accrual basis of accounting, expenditures are incurred when the City becomes obligated for payment, as a result of the receipt of the related goods and services. Expenditures reported include any property or equipment acquisitions incurred under the federal program. 8
Schedule of Findings and Questioned Costs I. SUMMARY OF AUDITOR S RESULTS Financial Statements Type of auditor's report issued: unqualified Internal control over financial reporting: Material weakness identified? yes X no Significant deficiencies identified that are not considered to be material weaknesses? yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major programs: Material weaknesses identified? yes X no Significant deficiencies identified that are not considered to be material weaknesses? X yes none reported Type of auditor's report issued on compliance for major programs: unqualified Any audit findings disclosed that are required to be reported in accordance with section 510(a) of OMB Circular A-133? X yes no 9
Schedule of Findings and Questioned Costs I. SUMMARY OF AUDITOR S RESULTS, (continued) Identification of major programs: CFDA Number Name of Federal Program 14.218 Community Development Block Grant / Entitlement Grants 14.253-ARRA ARRA - Community Development Block Grant / Entitlement Grants 14.239 HOME Investments Partnership Program Dollar threshold used to distinguish between type A and type B programs: $ 300,000 Auditee qualified as low-risk auditee? Yes X No II. FINDINGS FINANCIAL STATEMENT FINDINGS No matters to be reported. III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Passed through County of San Diego HOME Investments Partnership Program CFDA No. 14.239 2012-1 Criteria: The HOME Program has income targeting requirements. Only low-income or very lowincome persons, as defined in 24 CFR section 92.2, can receive housing assistance (24 CFR section 92.1). Therefore, the participating jurisdiction must determine if each family is income eligible by determining the family s annual income, as provided for in 24 CFR section 92.203. Participating jurisdictions must maintain records for each family assisted (24 CFR section 92.508). 10
Schedule of Findings and Questioned Costs III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS, (continued) Condition: The City did not maintain income eligibility records for every loan recipient. The City utilizes the services of the San Diego Housing Commission to underwrite the loans and therefore, the income verification is done by the San Diego Housing Commission. Questioned Cost: None noted. Effect: The City is ultimately responsible for the income eligibility requirements and risks awarding funds to a party who does not meet the income requirements by not reviewing the income verification documentation. Cause: The City was not appropriately requesting income verification documentation from the San Diego Housing Commission. Auditor s Recommendation: The City should request and maintain income records for each loan recipient. Grantee Response and Corrective Action Plan: The Grantee s response is reported in the Corrective Action Plan and considered as part of this report. 11
Summary Schedule of Prior Audit Findings CURRENT STATUS OF PRIOR YEAR FINDINGS: U.S. DEPARTMENT OF TRANSPORTATION Pass-through from the State of California Department of Transportation Safe Routes to School CFDA No. 20.205 2011-1 Grant No. SRTSLNI-5207(30) Condition: Hazard Construction Company Invoice #14363 included charges totaling $94,187.43 for construction work performed on the Allison Ave. project. This invoice related to expenses that were not reimbursable under the Safe Routes to School Grant Agreement. This invoice was submitted for reimbursement on April 21, 2011. Current Status: The finding has been corrected. The City s reporting and review procedures for all grant expenditures were changed in order to improve internal controls, accounting, and timely reporting. Invoices are reconciled to the City s general ledger and reviewed prior to submission for reimbursement. U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Direct Program ARRA-Community Development Block Grant / Entitlement Grants CFDA No. 14.253-ARRA 2011-2 Grant No. B-09-MS-06-0551 Condition: The City did not maintain CDBG-R expenditures separate from other CDBG expenditures. Current Status: The finding has been corrected. In fiscal year 2011-2012, all CDBG-R expenditures were accounted for in an account separate from other CDBG expenditures. Community Development Block Grant / Entitlement Grants CFDA No. 14.218 2011-3 Grant No. B-08-MC-06-0551 Condition: The City did not maintain documentation that sub-recipients are not excluded from participation in Federal programs. Current Status: The finding has been corrected. In fiscal year 2011-2012, all debarment and suspension status of all sub-recipients is verified and documented. This documentation is not required for all projects funded with Community Development Block Grant funds. 12
Summary Schedule of Prior Audit Findings CURRENT STATUS OF PRIOR YEAR FINDINGS, (continued): Community Development Block Grant / Entitlement Grants CFDA No. 14.218, continued 2011-4 Grant No. B-08-MC-06-0551 Condition: The City of La Mesa has not informed all subrecipients of the Catalog of Federal Domestic Assistance (CFDA) numbers. Current Status: The finding has been corrected. In fiscal year 2011-2012, sub-recipients were notified of the CFDA numbers for their records and documentation of this notification is kept in all project files. 13
CITY OF LAMESA JEWEL of the HILLS RNANCEDEPARTMENT CORRECTIVE ACTION PLAN February 4, 2013 U.S Department of Housing and Urban Development The City of La Mesa respectfully submits the following corrective action plan for the year ended June 30, 2012. Name and address of independent public accounting firm: Rogers, Anderson, Malady & Scott, LLP 735 E. Carnegie Dr. Suite 100 San Bernardino, California 92408 Audit Period: FINDING- FEDERAL AWARD PROGRAM AUDIT U.S. Department of Housing and Urban Development Pass-through from County of San Diego HOME Investments Partnership Program- CFDA No. 14.239 2012-1 Auditor Recommendation: The City should request and maintain income records for each family assisted. Action Taken by the City: The City acknowledges the findings and the issues with the retention of income verifications documents. This condition was identified during a HUD compliance audit in late 2011. Based on HUD's direction, the City now retains copies of income verification documents in its files for all loans. Furthermore, income verification documents are now part of the City's checklist of required documents. 8130 ALLISON AVENUE LA MESA. CA 91942 TEL: 619.463.6611 FAX: 619.667.1131
If the Department of Housing and Urban Development has questions regarding this plan, please call Heather Jennings, Finance Manager for the City of La Mesa at 619-667-1111. Sincerely yours, ~f!!!!!;t ~ Director of Finance City of La Mesa