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Home My WebLink About2016 CAFR presentationTown of Westlake Council Meeting February 27, 2017 Overview •Introduction •Audit Process •Required Communications •Audit Results •Financial Highlights •New Accounting Pronouncements •Questions 2 3 Introductions 4 The Firm of Texas Weaver is the largest independent accounting firm based in Texas and the Southwest. We’ve served Texas public sector entities for 66 years. REGIONAL AND NATIONAL RANKINGS Largest Firm based in the Southwest Region of the U.S. | Accounting Today (2016) #4 National Leaders in Tax (firms under $100M)| Accounting Today (2016) Top 40 Firms | INSIDE Public Accounting (2015) Top 50 Firms | Accounting Today (2016) 2015 BEST of the BEST Firm to Watch | INSIDE Public Accounting #9 Largest Houston-Area Accounting Firms: Global Revenue | Houston Business Journal (2016) #8 Largest North Texas Accounting Firms | Dallas Business Journal (2016) #3 Largest Tarrant County Accounting Firms | Fort Worth Business Press (2015) #7 Largest San Antonio Accounting Firms | San Antonio Business Journal (2016) Best and Brightest Companies to Work For®| Dallas/Fort Worth (2016) and Houston (2015) 5 Engagement Leadership John DeBurro Partner, Assurance Services Jerry Gaither Partner, Assurance Services 6 Engagement Team Town of Westlake LaTisha Smith Senior Associate I Jacqueline Diaz Audit Associate II Tom Winson, CPA Advisory Services -ACL Data Specialist Consulting John DeBurro, CPA Partner Audit 7 Audit Process Engagement Timeline 8 Initial Audit Planning Interim Fieldwork Aug 1 –Aug 5 Final Fieldwork Jan 16 –Jan 27 Release Audit Opinion Feb 23 Council Meeting Feb 27 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 August 2016. 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 2017 Procedures included: 12 Auditor Communications for the year ended September 30. 2016 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 2016 financial statements has been completed and we 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 have issued 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 2016 include GASB Statement No. 72,“Fair Value Measurement and Application” which expands disclosure requirements related to fair value measurements of the Town’s investments. 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, net pension liability, 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 representations 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 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. During the current year, there were no material adjustments posted as a result of our audit procedures. In addition, there were no uncorrected misstatements noted. Other material written communications between Weaver and Tidwell, L.L.P., and the Town Nothing to note. 19 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. 20 21 Financial Highlights 22 Financial Highlights Comparison of Governmental Funds Expenditures by Fund (in millions of dollars) $6.6 $7.9 $2.0 $1.2 $0.5 $2.8 $0.9 FY 2015 General Fund Westlake Academy Debt Service Fund Capital Projects Funds Westlake Academy ExpansionSolana PID Capital ProjectsNonmajor Governmental Funds Governmental Funds Expenditures for FY 2016 totaled $28.5 million, a $6.6 million or 30% increase •Capital outlay increased $4.3 million from FY15 due to increased construction of infrastructure for the Entrada development. •Education costs increased $1.3 million. $6.8 $9.2 $2.0 $0.3 $- $9.3 $0.9 FY 2016 General Fund Westlake Academy Debt Service Fund Capital Projects Funds Westlake Academy Expansion Solana PID Capital Projects Nonmajor Governmental Funds 23 Financial Highlights Comparison of Governmental Funds Expenditures $3.3 $2.5 $0.2 $0.8 $0.1 $0.7 $9.2 $9.6 $2.1 $2.4 $2.5 $0.1 $0.7 $0.2 $0.7 $7.9 $5.3 $2.1 $- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 $10.0 2016 2015 24 Financial Highlights Comparison of Governmental Revenues by Source Governmental Revenues for FY 2016 totaled $19.9 million, a $17.8 million or 47% decrease. This decrease is primarily due to the prior year contribution of $18.2 million of PID bond proceeds for the Solana Public Improvement District. 23.1% 7.5% 9.0% 32.7% 1.5% 13.6% 12.6% FY 2016 Revenues Sales taxes Property taxes Other taxes State program revenue Contributions Building permits and fees Other 13.0%3.7% 5.0% 16.4% 49.9% 3.2% 8.8% FY 2015 Revenues Sales taxes Property taxes Other taxes State program revenue Contributions Building permits and fees Other revenues 25 Financial Highlights Comparison of Governmental Revenues by Source (2 -year comparison –current year and prior year –in millions) $4.6 $1.5 $1.8 $6.5 $0.3 $2.7 $2.5 $4.9 $1.4 $1.9 $6.2 $18.8 $1.2 $3.3 $- $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $18.0 $20.0 Sales taxes Property taxes Other taxes State program revenue Contributions Building permits and fees Other 2016 2015 26 Financial Highlights Fund Balances Governmental Funds’ Fund Balances As of September 30, 2016, the Town’s governmental funds reported a combined ending fund balance of $20.4 million as follows: •General Fund $9,679,473 •Westlake Academy 1,158,762 •Debt Service 30,468 •Capital Projects 2,161,162 •WA Expansion 397,127 •Solana PID 5,943,200 •Other Funds 1,025,630 $20,395,822 Overall, fund balance of the Governmental Funds decreased by $7.8 million. General Fund fund balance increased by $1,998,923 during the year ended September 30, 2016. The ending balance, $9,679,473, represents 134% of fiscal year 2016 General Fund expenditures. 47.5% 5.7%0.1%10.6% 1.9% 29.1% 5.0%General Fund Westlake Academy Debt Service Capital Projects WA Expansion Solana PID Capital Project Other Funds 27 Financial Highlights Budgetary Highlights –General Fund The Town had a favorable budget variance of $259K (net change in fund balance): •Actual revenues were $156K more than budgeted. •Sales taxes were $35k more than budgeted. •Miscellaneous revenue was $103k more than budgeted. •Contributions were $13K more than budgeted. •Actual expenditures were below budget by $141k. 28 Financial Highlights Comparison of Proprietary Funds Operating Revenue and Expenses –FY 2016 and FY 2015 (in millions) $4.0 $4.7 $3.6 $4.1 $- $1.0 $2.0 $3.0 $4.0 $5.0 Operating Revenues Operating Expenses 2016 2015 Proprietary funds net position decreased by $1.8 million during fiscal year 2016, primarily the result of a $1.1 million payment to City of Ft. Worth for the Town’s proportionate share of water system upgrades to provide Westlake with future capacity needs. 29 Financial Highlights Proprietary Funds Operating Expenses-(in thousands) The $0.6 million increase in operating expenses is primarily the result of: •$135k increase in water purchases •$374K increase in other expenses, primarily due to increased wastewater treatment payments $423 $1,193 $497 $32 $1,358 $1,204 $359 $1,136 $493 $32 $1,223 $830 $- $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 Payroll costs Professional services Depreciation Amortization of WW Rights Water Purchases Other 2016 2015 30 Standards Required to be Implemented in FY2017 Effective for the year ended September 30, 2017 GASB 77 –Tax Abatements •Objective: to require governments that enter into tax abatement agreements to disclose certain information about tax abatement programs that reduce the reporting government’s tax revenues. •Effect: GASB 77 will require management to review existing tax abatement agreements to determine proper disclosure. GASB 82 –Pension Issues –an Amendment of GASB Statement No.s 67, 68 and 73 •Objective: to address certain issues that have been raised with respect to GASB Statements 67, 68 and 73. •Effect: GASB 82 will not have a significant effect on the Town’s financial reporting. 31 We appreciate the opportunity to work with Town of Westlake and look forward to our continued relationship. Questions? John DeBurro, CPA | Partner 972.448.6970 | john.deburro@weaver.com