Department of Finance
Reference: 2023 Financial Audit Report
To: Mayor Gregory Mills and Members of City Council
Through: Michael P. Martinez, City Manager
Prepared By: Catrina Asher, Finance Director
Haley Miller, Assistant Finance Director
Date Prepared: June 11, 2024
PURPOSE
To present the results of the 2023 annual financial audit.
BACKGROUND
The City is required by the Municipal Code to have an audit completed by an external auditor appointed by City Council within six months of year end (June 30th). An RFP to select an auditor was completed in 2023 and staff recommended selection of RubinBrown. City Council accepted the recommendation and appointed RubinBrown as the City’s financial auditor for the 2023 audit, with the option to renew the contract for up to 4 additional years. Audit services are competitively procured at least every five years.
A financial statement audit is an in-depth examination of the organization’s financial information and documentation, including internal controls. Financial statement audit procedures are designed to provide reasonable assurance about whether the financial statement as a whole are free from material misstatement. The City’s financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP), which includes accounting standards established by the Governmental Accounting Standards Board (GASB).
SUMMARY OF RESULTS
The audit of the 2023 Annual Comprehensive Financial Report (ACFR) was completed on May 23, 2024. The audit opinion issued by the auditors was unmodified, meaning that the financial statements fairly represent the financial condition of the City.
Auditors are required to communicate certain information to the City’s governing body (City Council) and the attached presentation includes all required communications.
Findings
An audit finding means that the auditors identified a financial reporting discrepancy or a compliance requirement wasn’t completed properly. One finding was identified in the 2023 audit. This was related to secondary reviews on ARPA grant reporting. All ARPA funds were utilized in 2023 on the water treatment plant project and quarterly reports were submitted to the grantor through the online reporting portal. The portal does not have a workflow to document review and approval of the reports, so secondary reviews were not documented. The amounts reported and their use was accurate and this finding was related solely to the documentation of a secondary review. To address this in the future, staff have added a review step prior to submission of quarterly reports through the grantor portal.
Management Letter Comments
Auditors provide Management Letter Comments to highlight areas where internal controls or other processes should be reviewed and improved to avoid findings in the future. Three comments were provided related to the 2023 audit. Those comments, along with our responses, are as follows:
Employee File Periodic Review
We noted there was certain documentation missing from employee files as a result of changes in regulations over time. We recommend a periodic review of employee files for compliance with the most current regulations.
Management response: The files that were missing documents were from long-time employees that began their employment under different documentation requirements, so the files were compliant at the time of hire. Files will be periodically reviewed, particularly if requirements change, to ensure they are current.
Intergovernmental Agreement Listing
We noted there is no comprehensive listing of active or current contracts and Intergovernmental Agreements (IGAs) available. A listing of all IGAs is available with the Clerk but whether the agreement is active is not tracked and value of the agreement is not easily located. We recommend the City maintain a comprehensive listing of active contracts and agreements with value and timing identified.
Management response: The City’s tracking of non-procured contracts is decentralized, which presents challenges with ensuring all are tracked and monitored. We recognize that this process needs to be revisited. Initial steps we are taking include the addition of a contract cover page that will be used in the future. We also propose centralizing contract administration and tracking and are exploring options to make that possible.
Escrow Balance And Agreement Listing
We noted the City did not have a detailed list of escrow balances held. We recommend the City maintain a list of deposits made by developer in order to cross reference refunds and/or recognize revenue for funds that will not be refunded.
Management response: Staff in Finance and Community Development are working together to bring clarity and consistency to this process. The team has already discussed ways of using tools like Monday.com to track the details of these agreements. This could also be improved by changes made to the IGA and non-procured agreement tracking discussed above.
Sales Tax Reconciliation Documentation
We noted that the City did not have a documented control over sales tax reconciliations. The City appears to be completing reviews; however, no documentation of this process is present. We recommend the City add documentation of review to their sales tax reconciliation process.
Management response: The comment appears to be related to documentation of review and not to a concern with the process itself. Staff will continue with the existing process and will add a sign off step to document the review.
The full ACFR is available on the City’s website at <https://www.brightonco.gov/245/Financial-Reports>.
Attachments:
Ø 2023 Annual Comprehensive Financial Report, including the Audit Opinion
Ø Presentation, including all required communications