2012 2:00:00 PM

Monday, December 10, 2012 2:00 PM
Sparks Legislative Building, 745 E. 4th Street, Sparks, NV 89431

General Business: 6.6

Title: Consideration and possible acceptance of the City’s Comprehensive Annual Financial Report (CAFR) for fiscal year 2011-2012, and review and possible approval of the City's Plan of Corrective Actions relating to our auditors' conclusion regarding the City of Sparks' compliance with Nevada Revised Statues and Administrative Code as identified in the annual audit process.

Petitioner/Presenter: Jeff Cronk, CPA, Financial Services Director/Debi Hunt, Accounting Manager

Recommendation: That the Council accept the Comprehensive Annual Financial Report as presented and review and approved the Plan of Corrective Action for fiscal year 2011-2012, and that Council authorize that the CAFR may now be distributed to interested parties as well as be submitted to the Government Finance Officers Association (GFOA) for consideration for its Certificate of Achievement for Excellence in Financial Reporting award.

Financial Impact: The fee associated with the GFOA award program is approximately $580.

Total Costs: $580.00

Fund: General Fund Account: 603242
Program: Finance Administration (080101)
Amount: $580.00 Budget Status: Budget Exists

Business Impact (Per NRS 237):
A Business Impact Statement is not required because this is not a rule.

Agenda Item Brief: Consideration of the fiscal year 2011-2012 Comprehensive Annual Financial Report (CAFR) and Plan of Corrective Action for acceptance and approval for distribution.

Background: Per Nevada Revised Statute (NRS) 354.624, all Nevada local governments must provide for an annual audit by a professional accounting firm. The City is required to have the audit of the financial statements concluded no more than five months after the end of the fiscal year, or November 30, or to apply for an extension. This year, due to extensive audit time required as a result of: 1) reorganization of city departments causing major changes in reporting, 2) the conversion to a new Fixed Assets module requiring conversion testing during the audit, 3) and a late discovery of multi-period error related to Maintenance Services provided, the City has asked the Department of Taxation for an extension to conclude the audit. If our external auditors are unable to conclude the audit and the audit report before the posting requirements for this Council meeting, we may have to delay presentation until the next meeting. The Comprehensive Annual Financial Report (CAFR) is the report representing the City’s compliance with state law. A request for proposal to perform the annual external audit for the City was put out to bid during the spring of 2009, and a three year contract with an option to extend for one additional year was awarded to Kafoury, Armstrong & Co. beginning with fiscal year 2008-2009. In addition, NRS 354.6245 and NAC 354.721 require that Council advise the Department of Taxation what action has been, or will be, taken to prevent recurrence of NRS violations related to our annual audit. See attached letter of corrective action to the Department of Taxation for more information.

Analysis: The major sections of the CAFR are as follows: • The Introductory Section which includes the Financial Services Director’s letter of transmittal that discusses items such as how the CAFR is presented, the profile of the City’s government, general economic conditions, and significant financial policies; • The Financial Section includes the independent auditor’s report on the financial statement, management’s discussion and analysis (MD&A), and the government-wide and individual fund financial statements; • The Statistical Section includes schedules of statistics showing financial trends, revenue capacity, debt capacity, demographic and economic information, and relevant operating information; • The Compliance Section includes the independent auditor’s reports on internal control over financial reporting, and the City’s compliance with requirements applicable to each major federal grant program. This section also includes the schedule of expenditures of all federal grant awards, and the schedule of the independent auditors’ findings and questioned costs. The fiscal year 2012 audit findings, recommendations, and management responses are listed and described in detail on pages 152-168 of the attached CAFR. Per NRS 354.624(9), the Council must either accept management’s responses to the auditor recommendations as listed in the Compliance Section of the CAFR, or adopt them with modifications, or reject them with reasons as to why they are rejected. • The Auditor’s Comments Section is a brief section including reports from the independent auditors concerning state statute compliance and certain recommendations. As can be seen in the independent auditor’s report on the City’s financial statement located within the Financial Section of the CAFR, the independent auditors have given an unqualified opinion stating that the City’s fiscal year 2011-2012 financial statement as presented in the CAFR are materially correct and fairly present the financial results and position of the City. An unqualified opinion represents a “clean” audit opinion and is the highest level that can be obtained. The independent auditor’s finding are presented and discussed in detail within the Compliance Section of the CAFR for all interested parties to review. In addition, representatives from Kafoury, Armstrong & Co. will be on-hand should members of the City Council have specific questions concerning their audit finding or procedures, or other information within the CAFR. In addition to receiving an unqualified opinion for fiscal year 2011-2012 financial statement, the previous fiscal year 2010-2011 was the thirty first year in a row that the Government Finance Officers Association awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Sparks. The Finance Department believes the current report continues to conform to the program’s requirements, and will submit the fiscal year 2011-2012 report for consideration of the award. Plan of Corrective Action: Our auditors' conclusions regarding the City of Sparks' compliance with Nevada Revised Statues and Administrative Code as identified in the annual audit process are listed and described in detail in Note 2 to the Financial Statements which can be found on pages 30-31 of the attached CAFR. Section B of Note 2, ‘Excess of Expenditure Over Appropriations…’, is a reference of budget violations. Section C of Note 2, ‘Compliance with Nevada Revised Statutes and Administrative Code’, refers to other NRS/NAC violations. The Department of Taxation requires that the City develop a Plan of Corrective Action for each of the violations. Plans of Corrective Action submitted to the Department of Taxation must be accompanied by minutes from a Council meeting as evidence that the plan was approved. Information regarding apparent violations of NRS and NAC that were identified in the annual audit for the year ended June 30, 2012, and a Plan of Corrective Action, is presented in the attached letter to the Department of Taxation.

Alternatives: The Council may choose not to accept the CAFR and approve the Plan of Corrective Action as presented, but in so doing, must provide alternative actions to address the audit findings as listed in the Compliance Section within 3 months of today’s meeting.

Recommended Motion: I move to accept the Comprehensive Annual Financial Report and approve the Plan of Corrective Action for fiscal year 2011-2012 as presented and authorize the Financial Services Director to distribute to interested parties as necessary.

Attached Files:

corrective action_20121206170341.pdf

Sparks FINAL CAFR 2012.pdf

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