20170314 FY2016 Audit Committee Presentation - Town of ProsperComprehensive Annual Financial Report (CAFR)
Fiscal Year Ended September 30, 2016
March 14, 2017
Presentation to the Town Council of
the Town of Prosper, Texas
Discussion Topics
Overview of the CAFR
Financial Highlights
Management Responsibilities and the Management
Representation Letter
Audit Results
–Auditor’s report
–Communication of significant deficiency
–Management Letter
Cooperation from Town’s Financial Team
Notes for next audit
1
Overview of the CAFR
1.The Town’s basic financial statements:
Government-wide Financial Statements –full accrual presentation; include
both the governmental and business-type activities
Fund Financial Statements –modified accrual presentation; reconciliations
Proprietary Funds –Statement of Financial Position; Statement of Revenues,
Expenses and Changes in Net Position; Statement of Cash Flows
Notes to the financial statements
2.Required supplementary information (Unaudited):
Certain limited audit procedures performed
Management’s Discussion and Analysis
Required Supplementary Schedules
Budget to Actual –General Fund
Budget to Actual –Impact Fees Fund
Pension Information
2
Overview of the CAFR (continued)
3.Other Information
Combining and Individual Fund Schedules (“In relation to”opinion)
Major Governmental Funds: Budget to Actual –Debt Service Fund
Nonmajor Governmental Funds: Combining Balance Sheet and
Combining Statement of Revenue, Expenses and Changes in Fund
Balances; Individual Fund Budget to Actual
Introductory Section (unaudited)
Statistical Section (unaudited)
3
Financial Highlights
Changes in Cash and Investment Accounts
Part of the reclassification of the FY2015 presentation –GASB 9 requires the reporting
of restricted assets for proprietary funds (Note 1)
In applying the provisions of GASB 72 and reviewing the nature of the accounts,
funds held with Texstar and Texpool are more faithfully represented as cash
equivalents rather than as investments.
4
2016 2015
Governmental-wide activities
Cash and cash equivalent $ 55,440,765 $ 6,710,889
Investments 103,432 5,359,397
Restricted cash and investments -34,140,568
55,544,197 46,210,854
Business-type activities
Cash and cash equivalent 8,020,829 998,926
Investments -2,583,692
Restricted cash and investments 4,182,968 7,334,862
12,203,797 10,917,480
Total Cash and Investments $ 67,747,994 $ 57,128,334
Financial Highlights (continued)
Deferred outflows of resources
The increase in the account was related to the increase in net pension liability as
calculated by TMRS in their FY2016 GASB 68 Employer Reporting Package which was
based on the Actuarial Valuation performed as of December 31, 2015. Below is a
rollforward showing the current year change in Deferred Outflows –Pensions
accounts:
5
Account No Account Description Opening Balance
CY Activity
(GASB 68 Entries)CY Ending Balance
200-1405-00-00 Deferred Outflows-Pensions $ 86,066 $ 100,702 $ 186,768
450-1405-00-00 Deferred Outflows-Pensions 6,237 6,721 12,958
910-1405-00-0A Deferred Outflows-Pensions 594,676 719,142 1,313,818
800-1405-00-00 Deferred Outflows-Pensions 23,180 22,848 46,028
$ 710,159 $ 849,413 $ 1,559,572
Financial Highlights (continued)
Change in the presentation of the component unit’s financial
statements
In the prior year, the financial statements of the Prosper Economic
Development Corporation (EDC) were discretely presented in the Town’s
financial report.
Based on determination made under GASB 14, as amended, the
following criteria were satisfied, indicating that the Town has financial
accountability over EDC:
–the Town appoints the voting majority of EDC’s governing board
–The Town can also impose its will by significantly influencing EDC’s programs,
projects, activities and levels of services performed.
Ultimately, EDC provide its services entirely for the benefit of the Town.
Therefore, for financial statement presentation purposes, EDC’s financial
information should be blended with the financial information for the
Town itself.
6
Financial Highlights (continued)
7
Financial Highlights (continued)
8
Financial Highlights (continued)
Prior period adjustments
This is disclosed in Note 13 of the CAFR.
As a result, beginning net position and beginning fund balance
increased by $676,684 and $900,003, respectively.
Adjustments arose from the following:
–Transfer of UTRWD impact fees collected from the Water and Sewer
Fund to the Impact Fee Fund
–Retainage payments made in prior years
–Reversal of the prior year’s amortization of the Town’s intangible asset
–Correction of the “Due to” and ”Due from” accounts’ beginning
balances
9
Financial Highlights (continued)
Significant changes in the General Fund
Increase in revenue was due to increases in property and sales taxes of $1,632,895
and $941,319, respectively, as well as noted increases in licenses and permits ($471,
223), charges for services ($204,573), and fines and forfeitures ($331,635).
Relative increase in expenditures was primarily due to net increase in general
government ($706,094), public safety ($790,850), and streets ($216,034).
10
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
2016 2015
Total Revenues
Total Expenditures
Transfers Out
Financial Highlights (continued)
Significant changes in the Water and Sewer and Storm Water Funds
Increase in revenue was primarily due to increased water revenue of $1,262,783 and
increased sewer revenue of $448,094.
Increase in operating expenses was due to the increases in contractual services and
water purchases accounts of $341,187 and $1,200,406, respectively.
Decrease in non-operating was due to net decrease in interest expense of $467,409.
11
$(2,000,000)
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
2016 2015
Operating Revenues
Operating Expenses
Non-operating Expenses
Transfers In (Out)
Management Responsibilities
Preparation and fair presentation of the financial statements in
accordance with U.S. GAAP; including the preparation of the
required supplementary information
Selection and use of appropriate accounting policies
Establishment and maintenance of effective internal controls
Compliance with applicable laws and regulations, contracts,
and grant agreements
Adjusting the financial statements to correct material
misstatements
Design and implementation of programs and controls to
prevent and detect fraud
Assume all management responsibilities of the assistance
provided during the audit
Written representations made to the auditors by management
12
Audit Results
Audit Report:
Auditor’s responsibility –express opinions on the financial statements
based on our audit as performed under generally accepted
auditing standards
Unmodified (“clean”) opinion
Obtain understanding of internal controls relevant to the audit for
identifying and assessing risks of material misstatement but not for
the purpose of expressing an opinion on such internal controls.
Required supplementary information –includes the Management’s
Discussion and Analysis, the statement of revenues, expenditures
and changes in fund balance –budget and actual for the Town’s
General Fund and Impact Fees Fund, and the pension plan
schedules.
Supplementary information –combining and individual fund
schedules
Other information –introductory and statistical sections
13
Audit Results (continued)
Significant deficiency in internal control over financial reporting:
AICPA Professional Standards’ AU-C 265 requires auditors to
appropriately communicate to those charged with governance
and management deficiencies in internal control that the auditor
has identified in an audit of financial statements.
No material weakness in internal control identified
Significant deficiency was a combination of the following:
–Unbilled utility fees for the FY2016 portion of the October 2016 billing
cycle
–True up of the property tax receivables and unearned tax revenues
against the difference between total property tax levied and collected
–Accrued salaries payable beginning balance was not reversed and
retainage payable was not adjusted for prior year payments of
retainage fees
–Change in the net pension liability and contributions made after the
measurement date were not de-expended and reported as deferred
outflows of resources
14
Audit Results (continued)
Management letter
This includes certain matters that we deemed are
opportunities for strengthening internal controls and
operating efficiency. Noted items include
recommendation for establishing accounting policies and
procedures as whole and on certain financial statement
accounts.
15
Audit Cooperation
16
We encountered no difficulties in dealing with management in performing
and completing our audit.
We are also pleased to report that no disagreements arose during the
course of the audit.
We would like also to extend our appreciation of the financial team’s
cooperation and assistance all throughout the audit.
Thank you very much!!!
Notes for Next Audit
17
Improve budget preparation
Internal service fund allocation
Separate accounting of the funds created for the TIRZs
Conduct interim and post engagement meetings
Prompt communication of audit issues and adjustments