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HomeMy WebLinkAboutSingle Audit Report for Fiscal Year Ending June 30 2013CITY OF PALM DESERT, CALIFORNIA SINGLE AUDIT OF FEDERALLY ASSISTED GRANT PROGRAMS JUNE 30, 2013 CITY OF PALM DESERT, CALIFORNIA TABLE OF CONTENTS June 30, 2013 Page Number Independent Auditors’ 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 1 -2 Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards 3 -5 Schedule of Expenditures of Federal Awards and Schedule of Findings and Questioned Costs: Schedule of Expenditures of Federal Awards 6 -7 Notes to Schedule of Expenditures of Federal Awards 8 -9 Schedule of Findings and Questioned Costs 10 -12 Summary Schedule of Prior Audit Findings 13 2875 Michelle Drive, Suite 300, Irvine, CA 92606 • Tel: 714.978.1300 • Fax: 714.978.7893 Offices located in Orange and San Diego Counties - 1 - INDEPENDENT AUDITORS’ 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 City Council City of Palm Desert Palm Desert, California We have audited, in accordance with the 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, the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Palm Desert, California (the City), as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated December 4, 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 opinions 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. 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 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. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. -2 - 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 its 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. 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. Irvine, California December 4, 2013 2875 Michelle Drive, Suite 300, Irvine, CA 92606 • Tel: 714.978.1300 • Fax: 714.978.7893 Offices located in Orange and San Diego Counties - 3 - INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 AND ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS City Council City of Palm Desert Palm Desert, California Report on Compliance for Each Major Federal Program We have audited the City of Palm Desert’s (the City) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended June 30, 2013. The City’s major federal programs are identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditors’ Responsibility Our responsibility is to express an opinion on compliance for each of the City’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City’s compliance. -4 - Opinion on Each Major Federal Program In our opinion, the City of Palm Desert complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2013. Other Matters The results of our auditing procedures disclosed an instance of noncompliance, which is required to be reported in accordance with OMB Circular A-133 and which is described in the accompanying schedule of findings and questioned costs as item Number 2013-01. Our opinion on each major federal program is not modified with respect to this matter. The City’s response to the noncompliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. -5 - Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit,each major fund, and the aggregate remaining fund information of the City of Palm Desert,as of and for the year ended June 30,2013,and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated December 4, 2013,which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. Irvine, California January 22, 2014, except to the date for the Schedule of Expenditures of Federal Awards to which the date is December 4, 2013 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND SCHEDULE OF FINDINGS AND QUESTIONED COSTS Catalog of Federal Expenditures Domestic Program of Disbursements Assistance Identification Federal to Number Number Awards Subrecipients U.S. Department of Housing and Urban Development Direct Programs: Community Development Block Entitlement Grants Cluster: Community Development Block Grants/ Entitlement Grants 14.218 B-11-MC-06-0594 294,665$ 93,013$ B-12-MC-06-0594 82,578 151,250 ARRA - Community Development Block Grants - Entitlement Grant 14.253 B-09-MY-06-0594 5,038 - Total U.S. Department of Housing and Urban Development 382,281 244,263 U.S. Department of Justice Direct Programs: Edward Byrne Memorial Justice Assistance Grant Program (JAG)16.804 2009-SB-B9-0954 100 - U.S. Department of Transportation Passed through the State of California Department of Transportation: Highway Planning and Construction 20.205 CML 5414 (008)50,275 - CML 5414 (009)195,962 - CML 5414 (010)49,218 - HSIPL 5414 (011)186,966 - Total Highway Planning and Construction 482,421 - Passed through the University of California, Berkeley Traffic Safety Center: State and Community Highway Safety-20.600 SC12302 27,234 - Sobriety Checkpoint Program LLEA SC13302 41,718 - Total Passed through the University of California, Berkeley Traffic Safety Center 68,952 - Passed through the City of Riverside: State and Community Highway Safety-Avoid 30 20.600 AL0842 4,134 - Passed through the California Office of Traffic Safety: State and Community Highway Safety 20.600 PT13114 77,812 Total State and Community Highway Safety 150,898 - Total U.S. Department of Transportation 633,319 - See Independent Auditors' Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards (pages 3 through 5) and Notes to Schedule of Expenditures of Federal Awards (pages 8 and 9). CITY OF PALM DESERT, CALIFORNIA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended June 30, 2013 Pass - Through Grantor / Federal Grantor / - 6 - Program Title Catalog of Federal Expenditures Domestic Program of Disbursements Assistance Identification Federal to Number Number Awards Subrecipients U.S. Department of Energy Direct Program: Energy Efficiency and Renewable Energy Information Dissemination, Outreach, Training and Technical Analysis/Assistance 81.117 DE-EE0005696 6,915$ -$ U.S. Department of Homeland Security Passed through Riverside County Treasurer: Homeland Security Grant Program 97.067 2010-0085 6,640 - TOTAL DISBURSEMENTS TOTAL EXPENDITURES See Independent Auditors' Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards (pages 3 through 5) and Notes to Schedule of Expenditures of Federal Awards (pages 8 and 9). CITY OF PALM DESERT, CALIFORNIA Federal Grantor / Pass - Through Grantor / Program Title - 7 - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended June 30, 2013 (CONTINUED) -8 - CITY OF PALM DESERT, CALIFORNIA NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS June 30, 2013 1.GENERAL: The accompanying Schedule of Expenditures of Federal Awards presents the activity of all federal financial assistance programs of the City of Palm Desert (the City). The City’s reporting entity is defined in Note 1 of the notes to the City’s financial statements. All financial assistance received directly from federal agencies as well as federal financial assistance passed through other government agencies to the City is included in the accompanying schedule. 2.BASIS OF ACCOUNTING: The accompanying Schedule of Expenditures of Federal Awards is presented using the modified accrual basis of accounting for governmental funds and the accrual basis for proprietary funds, which is described in the Note 1 of the notes to the City’s financial statements. 3.RELATIONSHIP TO COMPREHENSIVE ANNUAL FINANCIAL REPORT: Amounts reported in the accompanying Schedule of Expenditures of Federal Awards agree to amounts reported within the City’s Comprehensive Annual Financial Report (CAFR). 4.RELATIONSHIP TO FEDERAL FINANCIAL REPORTS: Amounts reported in the accompanying Schedule of Expenditures of Federal Awards agree with amounts reported in federal financial reports. See Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards (pages 3 through 5) and Schedule of Expenditures of Federal Awards (pages 6 and 7). -9 - CITY OF PALM DESERT, CALIFORNIA NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (CONTINUED) June 30, 2013 5.SUBRECIPIENTS: During the fiscal year ended June 30, 2013, the City disbursed federal funds to the following subrecipients under the Community Development Block Grant Program (CFDA #14.218): Amount Disbursed CDBG Borrego Community Health Foundation $12,500 Angel View 5,000 Desert Aids Project 29,083 Desert ARC 50,000 Desert Best Friends Closet 5,000 FIND 19,977 Fair Housing Council of Riverside County 32,515 Ranch Recovery Center 90,188 Total Subrecipient Payments $244,263 6.DEFERRED LOANS RECEIVABLE: The CDBG balance of deferred loans receivable at June 30, 2013 was $5,755. 7.CONTINGENCIES: Under the terms of federal and state grants, additional audits may be requested by the grantor agencies and certain costs may be questioned as not being appropriate expenditures under the terms of the grant. Such audits could lead to a request for reimbursement to the grantor agencies. See Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards (pages 3 through 5) and Schedule of Expenditures of Federal Awards (pages 6 and 7). -10 - CITY OF PALM DESERT, CALIFORNIA SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the year ended June 30, 2013 1.SUMMARY OF AUDITORS’ RESULTS: Financial Statements Type of auditors’ report issued: Unmodified Internal control over financial reporting: Material weakness identified?yes x no Significant deficiency identified?yes x none reported Noncompliance material to financial statements noted:yes x no Federal Awards: Internal control over major programs: Material weakness(es) identified?yes x no Significant deficiency(es) identified?yes x none reported Type of auditors’ report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of OMB Circular A-133?x yes no See Finding Number 2013-01 Identification of major programs: CFDA Number(s)Name of Federal Program or Cluster 14.218 United States Department of Housing and Urban Development, Direct Assistance, Community Development Block Grant (CDBG) 14.253 ARRA -United States Department of Housing and Urban Development, Direct Assistance, Community Development Block Grant (CDBG) Dollar threshold used to distinguish between type A and type B programs:$300,000 Auditee qualified as low-risk auditee?x yes no See Independent Auditors’ 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 and Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards (pages 1 through 5). -11 - CITY OF PALM DESERT, CALIFORNIA SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) For the year ended June 30, 2013 2.FINDINGS -FINANCIAL STATEMENT AUDIT: There were no significant deficiencies, material weaknesses or noncompliance material to the financial statements which were disclosed by the audit of the financial statements of the City of Palm Desert for the year ended June 30,2013. 3.FINDINGS AND QUESTIONED COSTS -MAJOR FEDERAL AWARD PROGRAM AUDIT: Finding Number 2013-01 Noncompliance -Reporting Major Program United States Department of Housing and Urban Development;Direct Assistance;Community Development Block Entitlement Grant; Community Development Block Grants Entitlement Grants (CFDA #14.218), Grant Identification Numbers: B-11-MC-06-0594 and B-12-MC-06-0594 Criteria As of October 1, 2010, the Federal Funding Accountability and Transparency Act (FFATA) requires a prime recipient of non-recovery act grants to report sub-awards of $25,000 or more on the FFATA Subaward Reporting System (FSRS -www.fsrs.gov). The prime awardee is required to file a FFATA sub-award report by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $25,000. Condition The City, a prime recipient, made three sub-awards in the amounts of $29,690, $29,083, and $50,000 subsequent to October 1, 2010 and did not report the required information on the FFATA Subaward Reporting System. See Independent Auditors’ 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 and Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards (pages 1 through 5). -12 - CITY OF PALM DESERT, CALIFORNIA SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) For the year ended June 30, 2013 3.FINDINGS AND QUESTIONED COSTS -MAJOR FEDERAL AWARD PROGRAM AUDIT (CONTINUED): Finding Number 2013-01 (Continued) Noncompliance –Reporting (Continued) Context The City had three sub-awards over $25,000 for the year ended June 30, 2013 and was unaware of the FFATA filing requirement sub-award report. Questioned Costs None. Cause The City staff was not aware of the FFATA requirement. Effect The City did not comply with the FFATA filing requirement. Recommendation We recommend that the City establish procedures that will ensure the reporting of required information for sub-awards greater than or equal to $25,000 on the FFATA Subaward Reporting System. Management Response The City was not aware of the reporting requirements for the Federal Funding Accountability and Transparency Act (FFATA). Upon receiving notification from our auditors regarding the report requirement, City staff filed all sub-awards greater than or equal to $25,000 on the FFATA sub-award Reporting System. City staff is now aware of the requirement and going forward will file the required FFATA sub-award report by the end of the month following the month in which the City of Palm Desert as prime recipient awards any sub-grant greater than or equal to $25,000. See Independent Auditors’ 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 and Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards (pages 1 through 5). -13 - CITY OF PALM DESERT, CALIFORNIA SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS For the year ended June 30, 2013 There were no findings reported for fiscal year 2011-12. See Independent Auditors’ 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 and Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards (pages 1 through 5).