RPVCCA_CC_SR_2015_04_07_J_FY13-14_Single_Audit_ReportMEMORANDUM
TO: HONORABLE MAYOR & CITY COUNCIL MEMBERS
FROM: KATHRYN DOWNS, ACTING FINANCE DIRECTOR
DATE: APRIL 7, 2015
SUBJECT: FY13-14 SINGLE AUDIT REPORT
REVIEWED: DOUG WILLMORE, CITY MANAGER (/(/tA)
RECOMMENDATION
Receive and file the Single Audit Report for the fiscal year ended June 30, 2014
(Attachment A).
BACKGROUND
As a recipient of federal, state, and county financial assistance, the City is responsible for
ensuring that an adequate internal control structure is in place to endsure compliance
with applicable laws and regulations related to those programs. In years when over
$500,000 is expended on federal financial assistance programs, the City is required to
undergo a Single Audit in conformity with the provisions of the Single Audit Act of 1984
and U.S. Office of Management and Budget Circular A-133, Audits of States, Local
Governments, and Non -Profit Organizations. For FY13-14, $839,625 was expended on
federal financial assistance programs.
DISCUSSION
The City's independent financial statement auditor, Vavrinek, Trine, Day & Co., LLP, have
completed the Single Audit and issued a report. The contents of the report are
summarized below.
Report on Internal Control — No deficiencies considered to be material weaknesses were
identified. No instances of noncompliance or other matters that would impact financial
statement amounts were identified.
Report on Compliance for each major program, Internal Control over Compliance, and
1
FY13-14 SINGLE AUDIT REPORT
April 7, 2015
Page 2 of 2
Schedule of Expenditures of Federal Awards — The auditor opined that the City complied
with requirements that could have a direct and material effect on each of its major federal
programs. However, one instance of noncompliance was identified, indicating a
deficiency in internal control over compliance (not financial statement amounts, as noted
above). Furthermore, the auditor opined that the schedule of expenditures and federal
awards is fairly stated.
Finding
The City received federal funds passed through the California Wildlife Conservation
Board for the acquisition of open space in Malaga Canyon. The City was required to
verify that the sellers of the properties were not suspended or debarred or otherwise
excluded from entering into a covered transaction.
The federal grant agreement did not include such direction, nor did City Staff receive such
direction orally or in writing from the federal official or the California Wildlife Conservation
Board officials who administered the grant on behalf of the federal government.
Staff responded to the finding, indicating that the City's processes will be amended so
City Staff will ensure that recipients of federally funded disbursements are not suspended
or debarred or otherwise excluded from entering into the transaction.
Staff also verified that the sellers of the Malaga Canyon open space were not suspended
or debarred or otherwise excluded from the transaction.
Attachment
A — Single Audit Report for the fiscal year ended June 30, 2014 (page 3 of agenda item)
FA
CITY OF RANCHO PALOS VERDES, CALIFORNIA
Single Audit Report
For the Fiscal Year Ended June 30, 2014
3
CITY OF RANCHO PALOS VERDES, CALIFORNIA
Single Audit Report
For the Fiscal Year Ended June 30, 2014
TABLE OF CONTENTS
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
Independent Auditors' Report on Compliance for Each Major Federal Program;
Report on Internal Control over Compliance; and Report on the Schedule of Expenditures of
Federal Awards Required by OMB Circular A-133...................................................................................3
Schedule of Expenditures of Federal Awards...............................................................................................6
Notes to the Schedule of Expenditures of Federal Awards...........................................................................7
Schedules of Findings and Questioned Costs
I. Summary of Auditors' Results.........................................................................................................8
II. Financial Statement Findings...........................................................................................................9
III. Federal Award Findings and Questioned Costs.............................................................................10
Summary Schedule of Prior Audit Findings................................................................................................12
2
Vavrinek, Trine, Day & Co., LLP
U"4 rl Certified Public Accountants
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
The Honorable City Council
of the City of Rancho Palos Verdes
Rancho Palos Verdes, 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, each major fund, and the aggregate remaining fund information of the City of Rancho Palos
Verdes, California (City), as of and for the year ended June 30, 2014, 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 18, 2014. Our report included an emphasis of matter regarding the City's adoption of
Governmental Accounting Standards Board Statement No. 65, Items Previously Reported as Assets and
Liabilities.
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 entity'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.
8270 Aspen Street Rancho Cucamonga, CA 91730 Tel: 909.466.4410 Fax: 909.466.4431 www.vtdcpa.com
FRESNO • LAGUNA HILLS • PALO ALTO • PLEASANTON • RANCHO CUCAMONGA • RIVERSIDE • SACRAMENTO
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 entity'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 entity's internal control and compliance. Accordingly, this communication is not
suitable for any other purpose.
V�Gti,.t��' ,
Rancho Cucamonga, California
December 18, 2014
2
6
Ur r,@,, 1.
Vavrinek, Trine, Day & Co., LLP
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT
ON SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED
BY OMB CIRCULAR A-133
The Honorable City Council
of the City of Rancho Palos Verdes
Rancho Palos Verdes, California
Report on Compliance for Each Major Federal Program
We have audited the City of Rancho Palos Verdes, California's (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, 2014. The City's major federal
program is 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.
Opinion on Each Major Federal Program
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
June 30, 2014.
8270 Aspen Street Rancho Cucamonga, CA 91730 Tel: 909.466.4410 Fax: 909.466.4431 www,vtdcpa.com
FRESNO • LAGUNA HILLS • PALO ALTO • PLEASANTON • RANCHO CUCAMONGA • RIVERSIDE • SACRAMENTO
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 2014-001. Our opinion on each major federal program is not modified with respect to
this matter.
The City's response to the noncompliance finding identified in our audit is described in the accompanying
schedule of findings and question costs. The City's response was not subject 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 and therefore, material weaknesses or significant deficiencies may
exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in
internal control that we consider to be material weaknesses. However, we identified a certain deficiency in
internal control over compliance, as described in the accompanying schedule of findings and questioned costs, as
item 2014-001, that we consider to be a significant deficiency.
The City's response to the internal control over compliance finding 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.
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.
n
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, each major
fund, and the aggregate remaining fund information of the City as of and for the year ended June 30, 2014, and
the related notes to the financial statements, which collectively comprise the City's basic financial statements. We
issued our report thereon dated December 18, 2014, which contained unmodified opinions on those financial
statements. Our report included an emphasis of matter regarding the City's adoption of Governmental Accounting
Standards Board Statement No. 65, Items Previously Reported as Assets and Liabilities. 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.
Rancho Cucamonga, California
March 23, 2015
9
CITY OF RANCHO PALOS VERDES, CALIFORNIA
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
Federal Grantor/Pass-Through Grantor/Program Title or Cluster Title
Catalog of
Federal Domestic
Assistance
Number
Entity's Identifying
Number
Federal
Expenditures
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Community Development Block Grants/Entitlement Grants
Passed through from:
County of Los Angeles Community Development Commission
14.218
601491-11
$ 54,243
County of Los Angeles Community Development Commission
14.218
D98694-13
51,000
County of Los Angeles Community Development Commission
14.218
601561-13
23,728
Subtotal- 14.218
128,971
Subtotal - U.S. Department of Housing and Urban Development
128,971
U.S. DEPARTMENT OF INTERIOR
Cooperative Endangered Species Conservation Fund
Passed through from:
Wildlife Conservation Board
15.615
SG-1304GB
227,500
Wildlife Conservation Board
15.615
SG-1305GB
329,750
Subtotal - 15.615
557,250
Multistate Conservation Grant Program
Passed through from:
15.628
11430-4850-.1001
23,260
California Department of Fish and Wildlife
Subtotal - 15.628
23,260
Outdoor Recreation Acquisition, Development and Planning
Passed through from:
15.916
06-01719
56,133
California Natural Resources Agency
Subtotal - 15.916
56,133
Subtotal - U.S. Department of Interior
636,643
U.S. DEPARTMENT OF TRANSPORTATION
Highway Planning and Construction
Passed through from:
California Department of Transportation
20.205
HSIPL5413(014)
66,213
California Department of Transportation
20.205
HSIPL 5413(011)
4,320
California Department of Transportation
20.205
1 iSIPL 5413(015)
3,478
Subtotal - 20.205
74,011
Subtotal - U.S. Department of Transportation
74,011
TOTAL EXPENDITURES OF FEDERAL AWARDS
$ 839,625
See accompanying notes to the schedule of expenditure of federal awards.
10
CITY OF RANCHO PALOS VERDES, CALIFORNIA
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
NOTE 1— GENERAL
The accompanying Schedule of Expenditures of Federal Awards (SEFA) presents the activity of all federal award
programs of the City of Rancho Palos Verdes, California (City). Federal awards received directly from federal
agencies as well as federal awards passed through other nonfederal agencies are included in the schedule. The
City's reporting entity is defined in Note 1 to the City's basic financial statements.
NOTE 2 — BASIS OFACCOUNTING
The accompanying SEFA is presented using the modified accrual basis of accounting. Under the modified
accrual basis of accounting, expenditures are incurred when the City becomes obligated for payment as a result of
the receipt of related goods and services. Expenditures reported include any property or equipment acquisitions
incurred under the federal program.
NOTE 3 — RELATIONSHIP TO BASIC FINANCIAL STATEMENTS
Federal and state award expenditures agree or can be reconciled with the amounts reported in the City's basic
financial statements.
NOTE 4 — CATALOG OF FEDERAL DOMESTIC ASSISTANCE (CFDA) NUMBERS
The CFDA numbers included in the accompanying SEFA were determined based on the program name, review of
grant contract information, and the Office of Management and Budget's Catalog of Federal Domestic Assistance.
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CITY OF RANCHO PALOS VERDES, CALIFORNIA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
I. SUMMARY OF AUDITORS' RESULTS
FINANCIAL STATEMENTS
Type of auditors' report issued:
Unmodified
Internal control over financial reporting:
Material weakness(es) identified?
No
Significant deficiency(ies) identified?
None Reported
Noncompliance material to financial statements noted?
No
FEDERAL AWARDS
Internal control over major federal programs:
Material weakness(es) identified?
No
Significant deficiency(ies) identified?
Yes
Type of auditors' report issued on compliance for major federal programs:
Unmodified
Any audit findings disclosed that are required to be reported in accordance with
Circular A-133, Section .510(a)
Yes
Identification of major federal programs:
CFDA Number(s) Name of Federal Program or Cluster
15.615 Cooperative Endangered Species Conservation Fund
Dollar threshold used to distinguish between Type A and Type B programs:
$ 300,000
Auditee qualified as low-risk auditee?
No
12
CITY OF RANCHO PALOS VERDES, CALIFORNIA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
II. FINANCIAL STATEMENT FINDINGS
None reported.
13
CITY OF RANCHO PALOS VERDES, CALIFORNIA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
FINDING 2014-001
Program: Cooperative Endangered Species Conservation Fund
CFDA No.: 15.615
Federal Grantor: Department of Interior
Passed -through: California Wildlife Conservation Board
Award Year: FY 2013-14
Compliance Requirement: Procurement and Suspension and Debarment
Criteria:
The March 2014 Office of Budget and Management (OMB) Circular A-133 Compliance Supplement states that
when a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity
must verify that the entity is not suspended or debarred or otherwise excluded. This verification may be
accomplished by checking the Excluded Parties List System (EPLS), collecting a certification from the entity or
adding a clause or condition to the covered transaction with the entity.
Condition:
Significant Deficiency, Instance of Non -Compliance - During the audit, we noted that the City did not perform the
online verification at https://www.samm_gov/portal/SAM/ (website), collect a certification, nor include a
verification clause in the contracts.
Questioned Costs:
None
Context:
The condition noted above was identified during our testing of the procurement and suspension and debarment
requirements of the program.
Effect:
The City increases their risk of contracting with a suspended, debarred or otherwise excluded entity.
Cause:
The City did not have procedures requiring verification of the suspended, debarred or otherwise excluded status of
contracted vendors.
Recommendation:
We recommend that the City develop procedures to verify suspension and debarment status of vendors prior to
entering into contracts with vendors of federally funded projects.
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CITY OF RANCHO PALOS VERDES, CALIFORNIA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Views of Responsible Officials and Planned Corrective Actions:
The City purchased real property from two individual private -party sellers using federal funds. The OMB
Circular A-1 10 (2 CFR section 180.225) states that the federal agency official should have apprised the City of
the requirement to verify that an entity is not suspended or debarred or otherwise excluded from participating in
the transaction, before entering into an agreement for federally funded procurement of goods and services. The
California Wildlife Conservation Board (WCB) administered the federal grant to the City. The federal grant
agreement awarded to the City did not include such direction, nor did City staff receive such direction orally or in
writing from the federal official or state WCB officials who administered the agreement on behalf of the federal
government.
The City will amend the City's processes so City Staff will ensure that recipients of City disbursements that are
federally funded are not suspended or debarred or otherwise excluded as indicated through the Excluded Parties
List System. Recipients may include vendors, contractors, or sellers of real property. The City's action will
include a review of the https://www.sam.gov/poortal/SAM/ website before entering into agreements with the
aforementioned recipients. Further, the City will develop procedures to ensure that recipients of federally funded
projects will provide a certification that they are not suspended or debarred or otherwise excluded. Such
procedures will include the incorporation of a clause in the agreement to cover this compliance requirement.
This process will be implemented for all types of contracts throughout the City's departments.
11 15
CITY OF RANCHO PALOS VERDES, CALIFORNIA
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
Summarized below is the current status of all audit findings reported in the prior year audit's schedule of
findings and questioned costs.
FINANCIAL STATEMENT FINDINGS
No matters were reported.
FEDERAL AWARDS FINDINGS
No matters were reported.
12 16