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
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Introductions
The Firm of Texas
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Weaver is the largest independent accounting firm in Texas and
the Southwest. We are consistently named a top firm in the state
and nationally.
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Engagement Leadership
Jerry Gaither
Partner, Assurance
Services
John DeBurro
Senior Manager,
Assurance Services
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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
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Audit Process
Engagement Timeline
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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
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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
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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.
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Final fieldwork- performed in January 2015
Procedures included:
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Auditor Communications
for the year ended September 30. 2014
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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Areas of Strength and
Accomplishments
•Management knowledgeable in municipal
finance
•Full cooperation of Town staff
•No material weaknesses in internal controls
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Financial Highlights
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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
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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
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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
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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
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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
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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.
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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.
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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
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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
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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