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HomeMy WebLinkAboutAudit presentation Town of Westlake Council Meeting March 2, 2015 Overview •Introduction •Audit Process •Required Communications •Audit Results •Areas of Strength and Accomplishment •Financial Highlights •New Accounting Pronouncements •Questions 2 3 Introductions The Firm of Texas #4 Largest Tarrant County Accounting Firms | Fort Worth Business Press #8 Largest North Texas Accounting Firms | Dallas Business Journal #7 Largest Austin Accounting Firms | Austin Business Journal #14 Largest Houston-Area Public Accounting Firms | Houston Business Journal #5 Largest San Antonio Accounting Firms | San Antonio Business Journal 2014 Top 50 Firms | INSIDE Public Accounting 2014 BEST of the BEST Firm | INSIDE Public Accounting Weaver is the largest independent accounting firm in Texas and the Southwest. We are consistently named a top firm in the state and nationally. 4 5 Engagement Leadership Jerry Gaither Partner, Assurance Services John DeBurro Senior Manager, Assurance Services 6 Engagement Team Town of Westlake John DeBurro, CPA Audit Senior Manager Bimpe McMillon Audit Senior I Marlon Williams, CPA Advisory Services -ACL Data Specialist Consulting Jerry Gaither, CPA Public Sector Leader Audit 7 Audit Process Engagement Timeline 8 Initial Audit Planning Interim Fieldwork Sept 29-Oct 1 Final Fieldwork Jan 5 – Jan 23 Release Audit Opinion Feb 17 Council Meeting Feb 23 Discuss Developments/ Issues Continuous Communication Audit Process •The audit was performed in accordance with Generally Accepted Auditing Standards (GAAS) and Generally Accepted Government Auditing Standards (GAGAS) •The audit process was a risk-based approach in which we identified potential areas of risk that could lead to material misstatement of the financial statements. We tailored our audit programs and resources to specifically address the following areas of risk: •Revenue recognition and related receivables •Capital projects, purchasing and compliance with bidding procedures •Payables, accrued liabilities, and expenditures 9 Audit Process •Walkthrough of accounting controls over significant transaction cycles: •Budget •Purchasing and Accounts Payable •Payroll •Cash Receipts – taxes, municipal court, utility billing •Test of internal controls: •Cash disbursements •Payroll •Test of compliance •Public Funds Investment Act •Bidding procedures 10 Interim fieldwork and risk assessment were performed in September 2014. Procedures included: Audit Process •Testing of significant account balances using a combination of vouching of material transactions, sampling transactions and applying analytical procedures. •Assisting with the preparation of the financial statements. 11 Final fieldwork- performed in January 2015 Procedures included: 12 Auditor Communications for the year ended September 30. 2014 13 Required Communications to Those in Charge of Governance Communication Results Auditor’s responsibility under generally accepted auditing standards (GAAS) The financial statements are the responsibility of the Town. Our audit was designed in accordance with GAAS in the U.S. and provide for reasonable rather than absolute assurance that the financial statements are free of material misstatement. Our responsibility is to express an opinion about whether the financial statements prepared by management with your oversight are fairly presented , in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. The audit of the fiscal year 2014 financial statements has been completed and have issued an unmodified opinion. 14 Required Communications to Those in Charge of Governance Communication Results Auditor’s Responsibility under Government Auditing Standards In addition to the GAAS responsibilities, we are required to issue a written report on our consideration of internal controls and identify significant deficiencies, including material weaknesses, if any. Our report does not provide assurance on internal controls. We design our audit to provide reasonable assurance of detecting material misstatements resulting from noncompliance with provisions of contracts or grant agreements that have a direct or material effect on the financial statements. We issue a written report on the results of these procedures; however, our report does not express an opinion on compliance. No findings noted. 15 Required Communications to Those in Charge of Governance Communication Results Unusual transactions and the adoption of new accounting principles The significant accounting policies used by the Town are described in Note 1 to the basic financial statements. New GASB pronouncements implemented in 2014 include GASB Statement No. 65, “Items Previously Reported as Assets and Liabilities”. As a result, bond issuance costs are no longer reported as assets in the statement of net position. Accordingly, the beginning net position of the Town’s Governmental Activities has been reduced by $647,443 to reflect the cumulative effect of the change in accounting principle. In addition, deferred loss on refunding is now reported as a deferred outflow of resources rather than as a liability. We noted no transactions entered into by the Town during the year for which there is a lack of authoritative guidance or consensus. 16 Required Communications to Those in Charge of Governance Communication Results Fraud and illegal acts No fraud, irregularities, or illegal acts were noted. Material weakness in internal control No material weaknesses noted. Other information contained in documents containing audited financial statements We performed limited procedures on the Management’s Discussion and Analysis (MD&A) and Required Supplementary Information (RSI). We did not provide any assurance on this information. Management judgments and accounting estimates Management’s estimates of state foundation revenue, uncollectible receivables, and useful lives of capital assets were evaluated and determined to be reasonable in relation to the financial statements as a whole. Management representations We requested certain representation from management that were included in the management representation letter. 17 Required Communications to Those in Charge of Governance Communication Results Difficulties encountered No significant difficulties were encountered during our audit. Management consultations We are not aware of management consulting with other accountants for a second opinion. Auditor independence No independence issues noted. 18 Required Communications to Those in Charge of Governance Communication Results Disagreements with Management Management was not in agreement with our assessment of the proper accounting treatment of the accrual of state foundation revenue. The Academy has historically recorded a portion of the subsequent school year’s allotment corresponding with the number of school days in August relating to the subsequent school year. Additionally, there continues to be a number of schools that have continued this practice and TEA has allowed the practice to continue. In our opinion, GASB Statement No. 33 precludes schools from accruing state foundation funds. 19 Required Communications to Those in Charge of Governance Communication Results Audit adjustments 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. As mentioned previously, the Academy and Weaver were in disagreement over the accrual of state foundation revenue. As a result, we have passed on an audit adjustment of $229,208 of state foundation revenue. No material adjustments have been posted as a result of our audit. Other material written communications between Weaver and Tidwell, L.L.P., and the Town Nothing to note. 19 20 Auditor Results Auditor Results •We have issued the Independent Auditor’s Report on the financial statements –Unmodified opinion •We have issued the Independent Auditor’s 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 –No findings noted. 21 Areas of Strength and Accomplishments •Management knowledgeable in municipal finance •Full cooperation of Town staff •No material weaknesses in internal controls 22 23 Financial Highlights 24 Financial Highlights Comparison of Governmental Funds Expenditures by Fund (in millions of dollars) $5.2 $7.1 $2.1 $1.1 $8.8 $0.7 FY 2014 General Fund Westlake Academy Debt Service Fund Capital Projects Funds Westlake Academy Expansion Nonmajor Governmental Funds Governmental Funds Expenditures for FY 2014 totaled $25.0 million, a $2.3 million or 10% increase •Capital outlay increased $2.4 million over FY13. •Educational costs increased $1.3 million. •Debt service costs decreased by $1.8 million. $4.6 $5.8 $3.8 $5.8 $1.8 $0.9 FY 2013 General Fund Westlake Academy Debt Service Fund Capital Projects Funds Westlake Academy Expansion Nonmajor Governmental Funds 25 Financial Highlights Comparison of Governmental Funds Expenditures $- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 $10.0 2014 2013 26 Financial Highlights Comparison of Governmental Revenues by Source Governmental Revenues for FY 2014 totaled $16.7 million, a $4.2 million or 20% decrease. Decrease is primarily attributable to a $4.7 million contribution of infrastructure in the prior year. 28.1% 8.4% 9.9% 31.7% 9.6% 7.2% 5.3% FY 2014 Revenues Sales taxes Property taxes Other taxes State program revenue Miscellaneous Building permits and fees Other 21.1% 6.7% 6.9% 22.5% 6.2% 4.8% 31.7% FY 2013 Revenues Sales taxes Property taxes Other taxes State program revenue Miscellaneous Building permits and fees Other revenues 27 Financial Highlights Comparison of Governmental Revenues by Source (2 -year comparison – current year and prior year – in millions) $- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 2014 2013 28 Financial Highlights Fund Balances Governmental Funds’ Fund Balances As of September 30, 2014, the Town’s governmental funds reported a combined ending fund balance of $11.9 million as follows: •General Fund $7,953,518 •Westlake Academy 1,071,298 •Debt Service 1,081 •Capital Projects 1,313,091 •WA Expansion 424,694 •Other Funds 1,123,958 $11,887,640 Overall, fund balance of the Governmental Funds decreased by $7.6 million, primarily the result of a $7.3 million decrease in Westlake Academy Expansion fund due to current year construction on the expansion project. General Fund fund balance increased by $901,887 during the year ended September 30, 2014. The ending balance, $7,953,518, represents 153% of fiscal year 2014 General Fund expenditures. 66.9% 9.0% 0.1% 11.0% 3.5% 9.4% General Fund Westlake Academy Debt Service Capital Projects WA Expansion Other Funds 29 Financial Highlights Budgetary Highlights – General Fund The Town had a favorable budget variance of $902K (net change in fund balance): •Actual revenues were $484K more than budgeted. •Sales taxes were $196 more than budgeted •Building permits and fees were $167K more than bugeted •Actual expenditures were below budget by $568K. 30 Financial Highlights Comparison of Proprietary Funds Operating Revenue and Expenses – FY 2014 and FY2013 (in millions) $- $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 Operating Revenues Operating Expenses 2014 2013 Proprietary funds net position decreased by $298K during fiscal year 2014, primarily the result of a $276K increase in operating expenses over fiscal year 2013. 31 Financial Highlights Proprietary Funds Operating Expenses- (in thousands) The increase in operating expenses is primarily the result of: •$127K increase in Other Expenses-due to the $213K Hwy 114 Lift Station Discharge Project •$83K increase in water purchases •$53K increase in payroll costs $- $200 $400 $600 $800 $1,000 $1,200 Payroll costs Professional services Depreciation Amortization of WW Rights Water Purchases Other 2014 2013 32 Standards Required to be Implemented in FY2015 Effective for the year ended September 30, 2015 GASB 68 – Accounting and Financial Reporting for Pensions •Objective: to improve financial reporting by state and local governmental pension plans •Effect: GASB 68 will require the recognition of net pension liabilities of employers in financial statements prepared on the accrual basis. GASB 71 – Pension Transition for Contributions made Subsequent to the Measurement Date-an Amendment to GASB 68 •Objective: to address an issue regarding application of the transition provisions of GASB 68. The statement requires that when transitioning to the new pension standards, the entity recognize a beginning deferred outflow of resources for the pension contributions made during the time between the measurement date of the beginning net pension liability and the beginning of the initial fiscal year of implementation. •Effect: GASB 68 will require the Town to recognize the beginning deferred outflow concurrent with the recognition of the net pension liabilities 33 We appreciate the opportunity to work with Town of Westlake and look forward to our continued relationship. Questions? Jerry Gaither, CPA, CGFM | Engagement Partner 972.448.6918| jerry.gaither@weaver.com John DeBurro, CPA | Senior Manager 972.448.6970 | john.deburro@weaver.com