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HomeMy WebLinkAbout2013 Special Purpose Audit Reports CITY OF BROOKLYN CENTER HENNEPIN COUNTY, MINNESOTA Special Purpose Audit Reports on Single Audit, Internal Controls, and Compliance With Laws and Regulations Year Ended December 31, 2013 THIS PAGE INTENTIONALLY LEFT BLANK CITY OF BROOKLYN CENTER HENNEPIN COUNTY, MINNESOTA Table of Contents Page Independent Auditor’s Report on the Schedule of Expenditures of Federal Awards Required by OMB Circular A-1331–2 Schedule of Expenditures of Federal Awards3 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 Standards4–5 Independent Auditor’s Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by OMB Circular A-1336–7 Independent Auditor’s Report on Minnesota Legal Compliance8 Schedule of Findings and Questioned Costs9–11 THIS PAGE INTENTIONALLY LEFT BLANK INDEPENDENT AUDITOR’S REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY OMB CIRCULAR A-133 To the City Council and Management City of Brooklyn Center, Minnesota We have audited, 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, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Brooklyn Center, Minnesota (the City) as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated May 8, 2014, which contained an unmodified opinion on those financial statements. Audit standards referred to in the previous paragraph require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by the U.S. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Nonprofit Organizations, and is not a required part of the basic financial statements of the City. The Schedule of Expenditures of Federal Awards 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 basic 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. (continued) -1- The purpose of this report on the Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 is solely to describe the scope of our testing of the Schedule of Expenditures of Federal Awards and the results of that testing based on our audit. Accordingly, this report is not suitable for any other purpose. Minneapolis, Minnesota May 8, 2014 -2- CITY OF BROOKLYN CENTER Schedule of Expenditures of Federal Awards Year Ended December 31, 2013 FederalFederal Federal Grantor/Pass-Through Grantor/Program TitleCFDA No.Expenditures U.S. Department of Housing and Urban Development Passed through Hennepin Count y Community Development Block Grants – Entitlement Grant14.2181,042,839$ s Community Development Block Grants – State’s Program and Non-Entitlement Grants in Hawai14.228379,524 i U.S. Department of Justice Direct program Bulletproof Vest Partnership Program16.6077,585 ARRA – Public Safety Partnership and Community Policing Grant16.71029,010 s Passed through Hennepin Count y Edward Byrne Memorial Justice Assistance Grant Progra16.73835,661 m U.S. Department of Transportation Passed through the City of Brooklyn Par k Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.60821,808 U.S. Department of Homeland Security Passed through the Minnesota Commissioner of Public Safet y Disaster Grants – Public Assistance (Presidentially Declared Disasters)97.03643,370 Total federal awards$1,559,797 Note 1:TheScheduleofExpendituresofFederalAwardsispreparedontheaccrualbasisofaccountinginaccordancewith therequirementsofOMBCircularA-133,AuditsofStates,LocalGovernments,andNonprofitOrganizations. Therefore,theamountspresentedinthisschedulemaydifferfromtheamountspresentedin,orusedinthe preparation of, the City’s basic financial statements. Note 2:Allpass-throughentitieslistedaboveusethesameCFDAnumbersasthefederalgrantorstoidentifythesegrants, and have not assigned any additional identifying numbers. -3- THIS PAGE INTENTIONALLY LEFT BLANK 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 To the City Council and Management City of Brooklyn Center, Minnesota We have audited, 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, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Brooklyn Center, Minnesota (the City) as of and for the year ended December 31, 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 May 8, 2014. ICOFR NTERNALONTROLVERINANCIAL EPORTING 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 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 to 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. (continued) -4- COM OMPLIANCE AND THERATTERS 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. PTR URPOSE OF HISEPORT 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 report is not suitable for any other purpose. Minneapolis, Minnesota May 8, 2014 -5- INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 To the City Council and Management City of Brooklyn Center, Minnesota RCEMFP EPORT ON OMPLIANCE FOR ACHAJOREDERALROGRAM We have audited the City of Brooklyn Center, Minnesota’s (the City) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (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 December 31, 2013. The City’s major federal programs are identified in the summary of audit results section of the accompanying Schedule of Findings and Questioned Costs. M’R ANAGEMENTSESPONSIBILITY Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. A’R UDITORSESPONSIBILITY 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 Nonprofit 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. OEFP PINION ON ACH MAJOR EDERALROGRAM In our opinion, the City 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 December 31, 2013. (continued) -6- RICOC EPORT ON NTERNALONTROL VER OMPLIANCE Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to on the previous page. 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. Minneapolis, Minnesota May 8, 2014 -7- INDEPENDENT AUDITOR’S REPORT ON MINNESOTA LEGAL COMPLIANCE To the City Council and Management City of Brooklyn Center, Minnesota We have audited, 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, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Brooklyn Center, Minnesota (the City) as of and for the year ended December 31, 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 May 8, 2014. TheMinnesota Legal Compliance Audit Guide for Political Subdivisions, promulgated by the Office of the State Auditor pursuant to Minnesota Statute § 6.65, contains seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our audit considered all of the listed categories. In connection with our audit, nothing came to our attention that caused us to believe that the City failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions, except as described in the Schedule of Findings and Questioned Costs as items 2013-001 and 2013-002. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the City’s noncompliance with the above referenced provisions. The City’s responses to the legal compliance findings identified in our audit have been included in the Schedule of Findings and Questioned Costs. The City’s responses were not subject to the auditing procedures applied in our audit of the financial statements and, accordingly, we express no opinion on them. The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and not to provide an opinion on compliance. Accordingly, this report is not suitable for any other purpose. Minneapolis, Minnesota May 8, 2014 -8- CITY OF BROOKLYN CENTER Schedule of Findings and Questioned Costs Year Ended December 31, 2013 A. SUMMARY OF AUDIT RESULTS This summary is formatted to provide federal granting agencies and pass-through agencies answers to specific questions regarding the audit of federal awards. Financial Statements X What type of auditor’s report is issued?Unmodified Qualified Adverse Disclaimer Internal control over financial reporting: X Material weakness(es) identified?YesNo X Significant deficiency(ies) identified?YesNone reported X Noncompliance material to the financial statements noted?YesNo Federal Awards Internal controls over major federal award programs: Material weakness(es) identified?YesXNo X Significant deficiency(ies) identified?YesNone reported X Type of auditor’s report issued on compliance for major programs?Unmodified Qualified Adverse Disclaimer Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of OMB Circular A-133?X YesNo Programs tested as major programs: Program or ClusterCFDA No. U.S. Department of Housing and Urban Development Community Development Block Grants – Entitlement Grants14.218 Community Development Block Grants – State’s Program and Non-Entitlement Grants in Hawaii14.228 Threshold for distinguishing between type A and B programs:$ 300,000 X Does the auditee qualify as a low-risk auditee?YesNo -9- CITY OF BROOKLYN CENTER Schedule of Findings and Questioned Costs (continued) Year Ended December 31, 2013 B. FINDINGS – FINANCIAL STATEMENT AUDIT None. C. FINDINGS – MAJOR FEDERAL AWARD PROGRAMS AUDIT None. D. FINDINGS – MINNESOTA LEGAL COMPLIANCE AUDIT 2013-001 Withholding Affidavit Criteria –Minnesota Statute § 270C.66. Condition – Before making final settlement with any contractor under a contract requiring the employment of employees for wages by said contractor or subcontractors, the City must obtain a certificate by the Commissioner of Revenue that the contractor or subcontractor has complied with the withholding requirements of Minnesota Statute § 290.92 (either Form IC-134 or a Contractor’s Withholding Affidavit). The City did not obtain the required certificate for two projects completed in 2013 prior to the final settlement being paid. Context –Two out of three contracts tested were not in compliance. This is a current year finding. Cause –This was an oversight by city personnel. Effect – The City did not obtain the required documentation of either a withholding affidavit or Commissioner of Revenue Form IC-134. Recommendation –We recommend that the City review purchasing procedures and obtain the required documentation prior to making the final payment on future contracts. Management’s Response –We have reviewed our process and determined that we were in error by not obtaining the required withholding certificate (Form IC-134) for the Earle Brown/Opportunity Street Lighting project and the Evergreen Park Athletic Field Lighting project. Staff was not fully aware that this is mandated on all projects and has since obtained the required documentation (Form IC-134) for these contracts. Additionally, we have revised our process and checklist to ensure we do not miss this on future projects. -10- CITY OF BROOKLYN CENTER Schedule of Findings and Questioned Costs (continued) Year Ended December 31, 2013 D. FINDINGS – MINNESOTA LEGAL COMPLIANCE AUDIT (CONTINUED) 2013-002 Claims and Disbursements Criteria –Minnesota Statute § 471.425, Subd. 2. Condition – Minnesota Statutes require cities to pay each vendor obligation according to the terms of each contract or within 35 days after the receipt of the goods or services or the invoice for the goods or services. If such obligations are not paid within the appropriate time period, the City must pay interest on the unpaid obligations at the rate of 1.5 percent per month or part of a month. For two disbursements selected for testing, the City did not pay the obligation within the required time period, and did not pay interest on the unpaid obligation. Context –Two out of forty disbursements tested were not in compliance. This is a current year and prior year finding. Cause –This was an oversight by city personnel. Effect – Two payments made to vendors were not paid within the timeframe as required by state statute, and the vendors were not paid interest to which they were entitled. Recommendation –We recommend that the City review claims and disbursement payment procedures in place to ensure future compliance with this statute. Management’s Response – The City will review claims and disbursement payment procedures to ensure future compliance with this statute. In these two instances, the Finance Department did not receive the invoices from the departments within the time period required by Minnesota Statutes. The Finance Department will inform departments about the importance of providing invoices and documentation to the Finance Department on a timely basis. The City is also in the process of reviewing software that would create an automated workflow for accounts payable. An automated workflow would allow the accounts payable clerk to scan invoices when received and route them electronically to departments. One of the benefits of this system is that staff could determine where invoices are throughout all steps of the process. Vendors would also be encouraged to send invoices directly to the Finance Department, instead of individual departments, and electronic (emailed) invoices would also be encouraged. E. SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS – MAJOR FEDERAL AWARD PROGRAMS AUDIT None. -11-