Comprehensive Annual Financial/Audit Report
CITY OF DUBUQUE, IOWA
MEMORANDUM
February 11, 1999
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT:
Submission of Fiscal Year 1998 Comprehensive Annual Financial
Report and Audit Reports
Finance Director Duane Pitcher has submitted the Fiscal Year 1998 Comprehensive
Annual Financial Report and Audit Reports.
I respectfully request acceptance of these reports by the Mayor and City Council
approval.
, ~\l
Il ;1
, I
i I
;' ". / ,i
! \ ~'! -1 ' , ;
(1 L,J~, <1 "l1r \,
Michael C. Van Milligen
MCVM/j
Attachment
cc: Barry Lindahl, Corporation Counsel
Tim Moerman, Assistant City Manager
~
~
CITY OF DUBUQUE, IOWA
MEMORANDUM
February 3, 1999
TO: Michael Van Milligen, City Manager
fJ~
FROM: Duane Pitcher, Finance Director
SUBJECT: Submission of Fiscal Year 1998 Comprehensive Annual Financial Report (CAFR)
and Audit Reports
INTRODUCTION
The purpose of this memorandum is to transmit the Fiscal Year 1998 Annual Financial Reports
prepared and audited by EideBailly, LLP, CPA's, and to enclose the Auditor's comments and
recommendations along with the City staff's response thereto. The City's independent auditor
found no instances of non-compliance with all applicable laws, regulations, contracts, and grants;
and found the general purpose financial statements free of material misstatement. The auditor's
report also notes that there are no material weaknesses in the City's internal control structure.
The Fiscal Year 1998 CAFR includes required disclosures on the state of readiness and financial
impact of the City's preparation for Year 2000 electronic data processing. Because of the nature
of the Year 2000 issue, the disclosures cannot be audited under current standards for
governmental audits. As required when information cannot be audited, the auditor has issued a
qualified opinion on the financial statements. This is a "clean" audit opinion, but limits the scope
of the opinion to all information other than the Year 2000 disclosures. This opinion is in
compliance with the Governmental Accounting Standards Board (GASB) requirements for Year
2000 disclosures and American Institute of Certified Public Accountants (AICPA) guidelines for
audit opinions on Year 2000 disclosures. This qualified audit opinion does not reflect negatively
the City of Dubuque financial statements in any way.
BACKGROUND
The City of Dubuque is required to have an annual audit in accordance with generally accepted
auditing standards, Chapter 11 of the Code of Iowa, Government Auditing Standards and Office
Management and Budget (OMB) Circular A-B3.
This Comprehensive Annual Financial Report is in conformance with the standards set by OMB
Circular A-B3. This federal regulation mandated audit standards for federal programs. The
OMB Circular A-B3 was newly implemented inFY 97.
The financial reports for governmental funds were prepared on the modified accrual basis of
accounting, under which revenues are recorded when they are measurable and available and
expenditures (other than interest on long-term debt) are recorded when the liability is incurred.
Financial reports for enterprise activities (Water, Wastewater, and Parking) were prepared on a
full accrual basis.
The audit reports also conform to generally accepted accounting principles since they provide a
truer statement of the City's financial position by providing financial statements showing the
assets, liabilities and equity for all funds.
Separate audit reports are required for the Parking Facilities and the Metropolitan Area Solid
Waste Agency and have also been submitted. The financial information for these entities is also
included in the Comprehensive Annual Financial Report.
AUDITOR'S RECOMMENDATIONS
As part of the annual audit, the Auditor includes recommendations for improving the financial
management system of the City. Attached is a copy of the Auditor's comments and
recommendations and City staff's response thereto.
ACTION STEP
It is recommended that the City Council receives and files the Fiscal Year 1998 audit reports
identified above and receives and files this communication and related enclosures.
Should any Council Member desire individual copies of the separate audits for Parking Facilities,
or the Solid Waste Agency, they are available from the Finance Department.
Enclosures
City of Dubuque FY 98 Audit Reports
Auditors Management Letter
City Responses to Recommendations in Management Letter
2
~
..~.-~
CITY OF DUBUQUE, IOWA
MEMORANDUM
January 28, 1999
TO: Michael Van Milligen, City Manager
~~
FROM: Duane Pitcher, Finance Director
SUBJECT: FY 98 Audit Management Letter
INTRODUCTION
The following is submitted in the response to the attached recommendations on bookkeeping
and/or accounting procedures made by Charles Bailly & Company after completion of the FY 98
Audit of the City.
BACKGROUND
A separate letter was issued covering specific findings and recommendations for the FY 98 audit
and is included; along with City responses, as part of the annual audit report. The attached letter
contains more general recommendations on improving the City's overall accounting and control
system.
DISCUSSION
Responses to the attached recommendations are as follows:
(1) Conversion of Accounting Records - The conversion to the new system now allows for
accrual entries on the accounting system. The prior accounting system allowed for entries to be
made on a cash basis only and did produce closing trial balance reports. As noted in the
management letter, City staff prepared all adjusting workpapers to convert records to the
modified accrual/accrual basis and loaded data into the financial reporting system. City staffwill
continue to work towards making all adjusting entries.
(2) Policies and Procedures - Certain policies and procedures, such as travel reimbursement,
fixed asset accounting, and purchasing are presently documented by Citywide administrative
policies. The City will continue to work to incrementally prepare a manual of accounting polices
and procedures.
(3) Five Flags Cash Account - Adjustments will be made in revenue recording to assure that
revenue is recorded in the accounting period in which it is earned.
(4) Federal Awards - The City Finance Department has expanded consolidated record keeping
for federal and state grants. The number of grants, and departments involved in grant projects has
also been expanded. The City will review the need to expand the grant accounting function to
include compliance elements other than financial.
2
~~>>~
EideBaillYLLP
~
Consultants · Certified Public Accountants
To the Honorable Mayor and
Members of the City Council
City of Dubuque
City Hall
13th and Central
Dubuque, Iowa 52001
In conjunction with our recently completed audit of the City of Dubuque, Iowa,
for the year ended June 30, 1998, we submit the following recommendations
relating to bookkeeping and/or accounting procedures. A separate letter was
issued, as part of our audit report, relating to the City's system of internal
control.
(1) Conversion of Accounting Records
Currently, the City maintains its accounting records using the cash basis
of accounting. However, in order to comply with generally accepted
accounting principles, the comprehensive . annual financial report (CAFR)
must be prepared using the modified accrual/accrual basis of accounting.
Eide Bailly LLP currently makes all adj ustments at year-end which are
necessary to convert the City's cash-basis amounts to the amounts used in
the CAFR.
Recommendation
The City's Finance Department has added personnel to their staff in order
to convert the accounting records to the modified accrual/accrual basis at
year end and prepare the financial statements required in the CAFR. At
this time, this person is doing the workpapers needed to convert the
accounting records to the modified accrual/accrual basis at year end, but
Eide Bailly LLP still makes the journal entries and prepares the financial
statements. We encourage the Finance Department to continue in their
advancement of converting to the modified accrual/accrual basis and
preparation of the financial statements required in the CAFR.
(2) Policies and Procedures
We noted that the City has begun to develop a written manual of accounting
policies and procedures but that the manual is not complete at this time.
Such a manual helps to define employees' roles and duties and ensures that
policies and procedures are consistently applied.
Recommendation
We recommend that the City continue to develop the manual of accounting
polices and procedures and complete it as soon as possible.
3341 Hillcrest Road · Dubuque, Iowa 52002-3809.319.556.1790 · Fax 319.557.7842
Offices in Arizona, Iowa, Minnesota, Montana, North Dakota and South Dakota - Equal Opportunity Employer
MEMBER
..-
INTERNATIONAL
"
.
To the Honorable Mayor and
Members of the City Council
Page 2
(3) Five Flags Cash Account
The City has two checking accounts for the Five Flags Civic Center; one
for the box office and one for concessions. Five Flags personnel prepare
a monthly financial statement for the Civic Center and in the following
month remit a check to the City for the Citis share of the previous montWs
revenue generated by the Civic Center.
Recommendation
We recommend that the City record the revenue from Five Flags in the same
period as it is received at the Civic Center since this money is both
measurable and available rather than in the following month as is
currently done. This will ensure that this revenue is recorded in the
proper accounting period.
(4) Federal Awards
The City
programs
Program.
years.
recei ves many federal awards each year. Some of these award
are ongoing from year to year, such as the CDBG Entitlement
There are other federal programs that last from one to three
For all federal programs, there are federal requirements that must be
adhered to in order to be in compliance with federal laws and regulations.
Presently, the City of Dubuque has a part-time person in the Finance
Department giving limited accounting assistance to some of the departments
with federal programs.
Recommendation
We recommend that the City expand this position to offer compliance
assistance, in addition to accounting assistance, to all departments that
receive federal grants. This position would assist the City in staying in
compliance with federal laws and regulations and would eliminate much
unnecessary time being spent in various City departments trying to
determine which compliance elements apply to their particular grant.
Year 2000 Compliance
The year 2000 is fast approaching and bringing with it the potential for vast
changes within our working environment. The rollover to the millennium may bring
many problems for your entity arising from computer software and hardware. A
number of computers and software packages can only store two digit dates. Some
of these systems will see the year 2000 as 1900, others may consider "00" an
invalid entry and not accept the date, or be confused by the "00" and not
function correctly. You need to assess and validate your software and hardware
to determine which systems are year 2000 compliant.
, ..
.
To the Honorable Mayor and
Members of the City Council
Page 3
The year 2000 problem is not strictly confined to computer software and hardware.
It affects any applications which contain embedded chips (using date dependent
logic). Embedded chips run many pieces of equipment, such as mechanical telephone
systems and security systems. For example, if a particular piece of equipment is
not year 2000 compliant, on January 1, 2000, that piece of equipment will be
unable to perform. To ensure that this does not happen within your facility, all
systems should be tested for proper rollover to the millennium. Contacts should
be made to vendors in determining if they have discovered a problem and whether
or not there is a solution. Finally, all computer software, hardware, and any
equipment containing embedded chips that are purchased now and between the year
2000 should have a year 2000 warranty.
Pursuant to Statement on Auditing Standards No. 61, "Communication with Audit
Committees," issued by the Auditing Standards Board of the American Institute of
Certified Public Accountants, we are reporting the following:
1. Our Independent Auditor's Report on the audited financial statements of
the City of Dubuque outlines our responsibilities and the responsibilities
of the management of the City. Generally, our responsibility is to express
an opinion, based on our audit, on the financial statements of the City,
which are the responsibility of the management of the City.
Our opinion is based on an audit conducted in accordance with generally
accepted auditing standards (GAAS); Chapter 11 of the Code of Iowa; and
the standards applicable to financial audits contained in Governmen t
Audi ting Standards, issued by the Comptroller General of the United
States. Those standards and provisions are designed to provide reasonable,
rather than absolute, assurance that the financial statements are free of
material misstatement. As part of our audit, we are required by GAAS to
make a study and evaluation of the accounting procedures and system of
internal control to determine the nature, timing, and extent of the
auditing procedures necessary for expressing an opinion on the financial
statements.
2. No changes were made during the past year in the significant accounting
policies of the City of Dubuque as disclosed in note 1 to the financial
statements.
3. There were no material passed audit adjustments.
4. There were no disagreements with the management of the City on financial
accounting and reporting matters and auditing procedures.
We would like to acknowledge the assistance extended to us by personnel of the
City of Dubuque during the course of our audit.
This report is intended solely for the use of the Honorable Mayor, City Council,
and management of the City of Dubuque and should not be used for any other
purpose.
EIDE BAILLY LLP
Consultants . Certified Public Accountants
z~
B~
LLf'
Dubuque, Iowa
December 4, 1998