HomeMy WebLinkAboutFY 17-18 Financial Audit Presentation 03-25-19Town of Westlake
Council Meeting
March 25, 2019
Overview
•Introduction
•Audit Process
•Required Communications
•Audit Results
•Financial Highlights
•New Accounting Pronouncements
•Questions
2
3
Introductions
4
Engagement Leadership
John DeBurro
Partner, Assurance
Services
Ben Cohen
Manager,
Assurance Services
5
Engagement Team
Town of Westlake
Ben Cohen, CPA
Manager
Jacqueline Diaz
Senior Associate II
Elisa Gilbertson, CPA
Advisory Services -ACL Data Specialist
Consulting
John DeBurro, CPA
Partner
Audit
6
Audit Process
Engagement Timeline
7
Initial Audit
Planning
Interim Fieldwork
Aug 27 –31
Final Fieldwork
Feb 4 –14
Release Audit
Opinion
March 19
Council Meeting
March 25
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
8
Audit Process
•Walkthrough of accounting controls over significant
transaction cycles:
•Purchasing and Accounts Payable
•Payroll
•Cash Receipts –taxes, municipal court, utility billing
•Capital Projects
•Budget
•Test of internal controls:
•Cash disbursements
•Payroll
•Test of compliance
•Public Funds Investment Act
•Bidding procedures
9
Interim fieldwork and risk assessment were performed
in August 2018. Procedures included:
Audit Process
•Testing of significant account balances using a combination
of techniques such as:
–vouching of material transactions,
–sampling transactions and
–applying analytical procedures.
•Assisting with the preparation of the financial statements.
10
Final fieldwork-performed in February 2019
Procedures included:
11
Auditor Communications
for the year ended September 30. 2018
12
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 2018 financial
statements has been completed and we
have issued an unmodified opinion.
13
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.
14
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
2018 include GASB Statement No. 75,
“Accounting and Financial Reporting for
Postemployment Benefits Other Than Pensions”
which required the Town to record liabilities for
Academy participation in the TRS CARE retiree
healthcare plan and for City retiree
participation in the TMRS Supplemental Death
Benefit Fund.
We noted no transactions entered into by the
Town during the year for which there is a lack of
authoritative guidance or consensus.
15
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 and OPEB liabilities, 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.
16
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.
17
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. Additionally, there were no
uncorrected misstatements discovered.
Other material written
communications between
Weaver and Tidwell, L.L.P.,
and the Town
Nothing to note.
18
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.
19
20
Financial Highlights
21
Financial Highlights
Governmental Funds Revenues by Source
Governmental Revenues for FY 2018 totaled $22.2 million, a $0.4 million or 2%
decrease. The decrease is primarily due to $1.2 million decreases in both
contributions and building permits and fees netted against the $1.3 million
increase in sales taxes.
27.0%
7.2%
7.7%
32.4%
2.3%
10.4%
13.0%
FY 2018 Revenues
Sales taxes
Property taxes
Other taxes
State program revenue
Contributions
Building permits and fees
Other
20.8%
7.1%
7.1%
29.2%
7.5%
15.5%
12.8%
FY 2017 Revenues
Sales taxes
Property taxes
Other taxes
State program revenue
Contributions
Building permits and
fees
Other revenues
22
Financial Highlights
Comparison of Governmental Revenues by Source
(2 -year comparison –current year and prior year –in millions)
$6.0
$1.6 $1.7
$7.2
$0.5
$2.3
$2.9
$4.7
$1.6 $1.6
$6.6
$1.7
$3.5
$2.9
$-
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
Sales taxes Property
taxes
Other taxes State
program
revenue
Contributions Building
permits and
fees
Other
2018
2017
23
Financial Highlights
Governmental Funds Expenditures by Fund
(in millions of dollars)
$8.3
$8.8
$2.3
$2.1
$5.2
$0.9
FY 2017
General Fund
Westlake Academy
Debt Service Fund
Capital Projects Funds
Solana PID Capital
Projects
Nonmajor
Governmental Funds
•Governmental Funds Expenditures for FY 2018 totaled $30.0 million, a $2.4 million or 9% increase.
This increase is primarily attributable to the $2.4 million increase in capital outlay.
•General government expenditures decreased approximately $0.9 million due to prior year costs
associated with the move of the Town offices.
$7.7
$9.0 $2.7
$8.5
$0.7
$1.4
FY 2018 General Fund
Westlake Academy
Debt Service Fund
Capital Projects
Funds
Solana PID Capital
Projects
Nonmajor
Governmental Funds
24
Financial Highlights
Comparison of Governmental Funds Expenditures
$3.7
$3.0
$0.2 $0.7 $0.4 $0.9
$9.0 $9.4
$2.7
$4.6
$2.7
$0.2
$0.8
$0.2 $0.7
$8.8
$7.0
$2.6
$-
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
$10.0
2018
2017
(2 -year comparison –current year and prior year –in millions)
25
Financial Highlights
Fund Balances
Governmental Funds’ Fund Balances
As of September 30, 2018, the Town’s governmental funds reported a combined
ending fund balance of $20.0 million as follows:
•General Fund $10,796,248
•Westlake Academy 1,121,198
•Debt Service 28,798
•Capital Projects 5,562,517
•Solana PID CPF 78,557
•Other Funds 2,451,075
$20,038,393
Overall, fund balance of the Governmental Funds decreased by $7.8 million,
primarily due to the $7.3 million decrease in the capital projects fund, the result
of spending down of proceeds of previously-issued certificates of obligation on
capital projects.
General Fund fund balance decreased $141,244 during FY18. Unassigned fund
balance ($10,493,380) represents 136% of fiscal year 2018 General Fund
expenditures.
53.9%
5.6%0.1%
27.8%
0.4%
12.2%General Fund
Westlake Academy
Debt Service
Capital Projects
Solana PID Capital
Project
Other Funds
26
Financial Highlights
Budgetary Highlights –General Fund
The Town had a favorable budget variance of $500,454 (net change in
fund balance):
•Actual revenues were $198,409 more than budgeted.
•Sales taxes were $569,763 more than budgeted.
•Franchise fees were $204,309 less than budgeted.
•Building permits and fees were $105,548 less than budgeted.
•Actual expenditures were below budget by $679,628 due to cost
savings realized in all areas.
•Net transfers were $377,583 more than budgeted.
27
Financial Highlights
Comparison of Proprietary Funds Operating Revenue
and Expenses –FY 2018 and FY 2017 (in millions)
$5.8 $6.2
$4.8
$4.0
$-
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
Operating Revenues Operating Expenses
2018
2017
Proprietary funds net position decreased by $347K during fiscal year 2018.
Operating revenues increased $1.0 million primarily due to an increases in
both water and sewer revenues, the result of increased consumption.
Operating expenses increased $2.2 million.
28
Financial Highlights
Proprietary Funds Operating Expenses-(in thousands)
The $2.2 million increase in operating expenses is primarily the net result of:
•$907K paid to City of Ft. Worth for the Town’s share of waterline project
costs.
•$743K increase in wastewater treatment costs.
•$354K increase in cost of water purchases
$466
$1,009
$495
$32
$1,570
$2,600
$498
$95
$496
$31
$1,216
$1,687
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Payroll costs Professional
services
Depreciation Amortization
of WW Rights
Water
Purchases
Other
2018
2017
Upcoming Changes
Fiduciary Activities
The primary objective of this Statement is to
improve guidance regarding the identification
of fiduciary activities for accounting and
financial reporting purposes and how those
activities should be reported.
This Statement establishes criteria for
identifying fiduciary activities of all state and
local governments. The focus of the criteria
generally is on (1) whether a government is
controlling the assets of the fiduciary activity
and (2) the beneficiaries with whom a
fiduciary relationship exists. Separate criteria
are included to identify fiduciary component
units and postemployment benefit
arrangements that are fiduciary activities.
29
GASB 84:
Effective
for periods
beginning
after
12/15/2018
(FY2020)
Upcoming Changes
Leases
The objective of this Statement is to better meet
the information needs of financial statement
users by improving accounting and financial
reporting for leases by governments.
This Statement increases the usefulness of
governments’ financial statements by requiring
recognition of certain lease assets and liabilities
for leases that previously were classified as
operating leases and recognized as inflows of
resources or outflows of resources based on the
payment provisions of the contract.
It establishes a single model for lease accounting
based on the foundational principle that leases
are financings of the right to use an underlying
asset.
30
GASB 87:
Effective
for periods
beginning
after
12/15/2019
(FY2021)
31
We appreciate the
opportunity to work with
Town of Westlake and look
forward to our continued
relationship.
Contact Us
John DeBurro, CPA
Engagement Partner
972.448.6970 | john.deburro@weaver.com
Ben Cohen, CPA
Audit Manager
817.882.7332 | ben.cohen@weaver.com
Discussion