Financial Statements Audit Report City of Grand Coulee

Financial Statements Audit Report

City of Grand Coulee Grant County

For the period January 1, 2013 through December 31, 2013

Published March 2, 2015

Report No. 1013695

Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370 TDD Relay (800) 833-6388

March 2, 2015

Mayor and City Council City of Grand Coulee Grand Coulee, Washington

Report on Financial Statements Please find attached our report on the City of Grand Coulee’s financial statements.

We are issuing this report in order to provide information on the City’s financial condition.

Sincerely,

TROY KELLEY STATE AUDITOR OLYMPIA, WA

Washington State Auditor Troy Kelley

TABLE OF CONTENTS

Schedule Of Audit Findings And Responses .................................................................................. 4

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 ....................................................................... 7

Independent Auditor’s Report On Financial Statements .............................................................. 10

About The State Auditor’s Office ................................................................................................. 12

Washington State Auditor's Office

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SCHEDULE OF AUDIT FINDINGS AND RESPONSES


January 1, 2013 through December 31, 2013

2013-001 The City’s internal controls over accounting and financial

statement preparation are inadequate to ensure timely reporting.

Background City Council, the Mayor, state and federal agencies, and the public rely on the information included in the financial statements and reports to make decisions. It is the responsibility of the City to design and follow internal controls that provide reasonable assurance regarding the preparation of financial reporting.

State law (RCW 43.09.230) requires the City to submit its annual report to our office by May 31st each year. The annual report includes financial statements, supporting schedules and notes to the financial statements.

Description of Condition We identified the following deficiencies in internal controls over accounting and financial statement reporting that represent a material weakness:

• The Clerk/Treasurer did not complete monthly reconciliations and entries or compile the reports for submission of the annual report.

• City management did not take appropriate action to ensure the City’s financial statements were prepared.

Cause of Condition Prior to 2014, the City used an outside contractor to prepare the annual report. However, in 2014, the contractor was no longer available and the Clerk/Treasurer had to prepare the annual report for the first time.

The City did not make financial statement preparation a priority or allow adequate time to complete monthly reconciliations.

Effect of Condition We are unable to express an opinion on the District’s financial statements for 2013 and no financial statements will be included in our report.


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The City will not have audited financial statements for use in conducting business or applying for loans or grants.

Recommendation We strongly recommend the City’s Council take action to establish policies, procedures and adequate oversight to comply with financial reporting requirements.

City’s Response The City has relied on contractual services in recent years for the accomplishment of the reconciliations and financial statements due to the changeover of clerks in 2011. The contracted service lead for this work took another position near the time frame that the city needed services for the 2013 audit. This reliance led to the clerk not being adequately trained in the accomplishment of these tasks and subsequently did not accomplish the actions timely. The City will ensure that the reconciliations are completed monthly and financial reports are completed as prescribed by state statue. The Mayor will ensure the workload is completed in a timely manner. The clerk will attend state sponsored training when it is available.

Auditor’s Remarks We appreciate the steps the City is taking to resolve this issue. We will review the condition during our next audit.

Applicable Laws and Regulations RCW 43.09.230 Local government accounting- Annual reports- Comparative statistics, states in part:

The state auditor shall require from every local government financial reports covering the full period of each fiscal year, in accordance with the form and methods prescribed by the state auditor, which shall be uniform for all account of the same class. Such reports shall be prepared, certified and filed with the state auditor within one hundred fifty days after the close of each fiscal year.

Budgeting Accounting and Reporting System (BARS) manual - Part 3, Accounting, Chapter 1. Accounting Principles and General Procedures, Section C. Internal Controls, states in part:

Internal control is defined by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), in standards


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adopted by the American Institute of Certified Public Accountants and by the Federal Office of Management and Budget as follows:

Internal Control is a process- affected by those charged with governance, management and other personnel designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

• Effectiveness and efficiency of operations

• Compliance with applicable laws and regulations

• Reliability of financial reporting

Management and the governing body are responsible for the government’s performance, compliance and financial reporting. Therefore, the adequacy of internal control to provide reasonable assurance of achieving these objectives is also the responsibility of management and the governing body. The governing body has ultimate responsibility for ensuring adequate controls to achieve objectives, even though primary responsibility has been delegated to management.

Government Auditing Standards, January 2007 Revision, Section 5.11 states:

For all financial audits, auditors should report the following deficiencies in internal control:

a. Significant deficiency: a deficiency in internal control, or combination of deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with GAAP such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected.

b. Material weakness: a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.


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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


January 1, 2013 through December 31, 2013


We were engaged to audit the financial statements of the City of Grand Coulee, Grant County, Washington, for the year ended December 31, 2013, and the related notes to the financial statements. We were not able to obtain financial statements supporting the financial activities of the City for the year ended December 31, 2013, nor were we able to satisfy ourselves as to those financial activities by other auditing procedures. Accordingly, we do not express an opinion on the financial activities for 2013.

INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying Schedule of Audit Findings and Responses, we identified certain deficiencies in internal control that we consider to be material weaknesses.

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 Washington State Auditor's Office

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deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described in the accompanying Schedule of Audit Findings and Responses as Finding 2013-001 to be material weaknesses.

COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of the City’s 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.

CITY’S REPONSE TO FINDINGS The City’s response to the findings identified in our audit is described in the accompanying Schedule of Audit Findings and Responses. The City’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response.

PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. However,


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this report is a matter of public record and its distribution is not limited. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations.


January 28, 2015


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INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS

City of Grand Coulee

Grant County January 1, 2013 through December 31, 2013


REPORT ON THE FINANCIAL STATEMENTS We were engaged to audit the financial statements of the City of Grand Coulee, Grant County, Washington, for the year ended December 31, 2013.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of Washington State statutes and the Budgeting, Accounting and Reporting System (BARS) manual prescribed by the State Auditor. This includes determining that the basis of accounting is acceptable for the presentation of the financial statements in the circumstances. Management is also responsible for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on conducting the 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. Because of the matter described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide basis for an audit opinion.


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Basis for Disclaimer of Opinion

The City did not provide financial statements or supporting schedules for the period ended December 31, 2013, and therefore, representations of the City’s financial activities were not available for audit.

Disclaimer of Opinion

Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements. The statements are not included in our report.

Other Matters Regarding Disclaimer of Opinion

As the statutory auditor of all public accounts in the state of Washington we are precluded from withdrawing from the audit engagement, regardless of the matters described in the Basis for Disclaimer of Opinion paragraph.

OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated January 28, 2015 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.


January 28, 2015


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ABOUT THE STATE AUDITOR’S OFFICE

The State Auditor's Office is established in the state's Constitution and is part of the executive branch of state government. The State Auditor is elected by the citizens of Washington and serves four-year terms.

We work with our audit clients and citizens to achieve our vision of government that works for citizens, by helping governments work better, cost less, deliver higher value, and earn greater public trust.

In fulfilling our mission to hold state and local governments accountable for the use of public resources, we also hold ourselves accountable by continually improving our audit quality and operational efficiency and developing highly engaged and committed employees.

As an elected agency, the State Auditor's Office has the independence necessary to objectively perform audits and investigations. Our audits are designed to comply with professional standards as well as to satisfy the requirements of federal, state, and local laws.

Our audits look at financial information and compliance with state, federal and local laws on the part of all local governments, including schools, and all state agencies, including institutions of higher education. In addition, we conduct performance audits of state agencies and local governments as well as fraud, state whistleblower and citizen hotline investigations.

The results of our work are widely distributed through a variety of reports, which are available on our website and through our free, electronic subscription service.

We take our role as partners in accountability seriously, and provide training and technical assistance to governments, and have an extensive quality assurance program.

Contact information for the State Auditor’s Office

Deputy Director for Communications

Thomas Shapley

[email protected]

(360) 902-0367

Public Records requests (360) 725-5617

Main telephone (360) 902-0370

Toll-free Citizen Hotline (866) 902-3900

Website www.sao.wa.gov


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http://www.sao.wa.gov/investigations/Pages/FraudProgram.aspx

http://www.sao.wa.gov/investigations/Pages/Whistleblower.aspx

http://www.sao.wa.gov/investigations/Pages/CitizenHotline.aspx

http://www.sao.wa.gov/Pages/default.aspx

https://portal.sao.wa.gov/saoportal/Login.aspx

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Financial Statements Audit Report City of Grand Coulee

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Transcript of Financial Statements Audit Report City of Grand Coulee