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Home My WebLink About1986 Financial Statement June 30�� .,..fii'.'c '� __ z..�s..rt: ^,..�� v_r�.�:. m..�-.-, � ... .. . . t TOWN OF MARANA, ARIZONA YEAR ENDED JUNE 30, 1986 � � E � , [ k i ^.�� L > . . ^�R ER ..... . v.� L �€'tl . ..� . . ..., w+`' APR 3 0 1987 Q TOWN OF MARANA, ARIZONA YEAR ENDED JUNE 30, 1986 TABLE OF CONTENTS EXHIBIT Accountants' report General purpose financial statements: 1 Combined balance sheet, all fund types and account groups 2 Combined statement of revenues, ex- penditures and changes in fund balances, all governmental fund types 3 Combined statement of revenues, ex- penditures and changes in fund bal- ances, budget and actual, general and special revenue fund types - Notes to combined financial statements Report on internal_accounting control Report on compliance with laws and re- gulations Report on sup�lementary schedule of Federal financial assistance Supplementary schedule of Federal fi- nancial assistance PAGE 1 2 �3 4 5-11 12-16 17-19 20 21 ' --._. . -- l T�J� lr � l� _ _----- . �,� 1�I�'��7U��1 _ _ _ < < � . i, �' ! .. ;�. , , . . . . � � � � ,. � . . 1 � . � � , � � . � 1 . �. ... . . � . � . Honorable Mayor and Town Council Town of Marana Marana, Arizona We have examined the general purpose financial statements of the Town of Marana, Arizona, as of and for the year ended June 30� 1986, as listed in the table of contents. Our examination was made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the" circumstances. Sn our opinion, the general purpose financial statements referred to above present fairly the financial position of the Town of Marana, Arizona, at June 30, 1986, and the results of its opera- tions for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. � October 7, 1986 1 �.,M _ TOWN OF MARANA, ARIZONA COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS - EXHIBIT 1 JJNE 30, 1986 Governmental Fund TYpes Special General Revenue $ 35,323 $ 57,675 14,043 563,620 $ 49,366 $ 621,295 $ 36,286 $ 573,342 20,277 68,355 36,286 661,974 13,080 ( 40,679) 13,080 ( 40,679) $ 49,366 $ 621,295 Assets Cash Accounts and grants receivable Due from other funds Amounts to be provided Fixed assets (Note 2) Total assets Liabilities and Fund Ectuitv Liabilities: Accounts payable and accrued expenses Retainage payable Due to other funds Note payable bank, short-term Long-term debt (Note 3) Total liabilities Commitments and contingencies (Notes 3 and 6) Fund equity (deficit): Investment in fixed assets Unreserved fund balances (deficit) ,Total fund equity (deficit) Total Ziabilities and fund equity � 2 $ 483,923 483,923 454,240 ( 27.599) 48.471 483,923 456,324 502,711 � 483 923 � 108,066 $1,262,650 � 704,076 $ 58,042 25,688 32,984 133,122 454,240 $ 704,076 $ 35,259 32,984 133,122 108.066 806,326 201,365 $ 92,998 577,663 $ 108,066 108,066 $ 483,923 483.923 $ 483,923 $ 108,066 $1,262,650 $ 609,628 20,277 68,355 $ 108,066 108,066 Total� Account Groups (Memorandum Only) General General Long- Fixed Assets Term Debt 1986 1985 See notes to financial statements. �; � >:. ; .... TOWN OF MAR.ANA, ARIZONA COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES - EXHIBIT 2 YEAR ENDED JUNE 30, 1986 General $ 331,400 8,871 34,044 7.191 Special Revenue $ 985,364 381,506 122,724 15,024 217,656 28,222 383,626 ( 2,120) 10,360 4,840 � 13,080 985,364 122,334 26,568 910.312 1, 059-, 314 Revenues: Taxes Licenses and permits Fines, forfeitures and penalties Grants and contributions on Federal and State programs Miscellaneous Total revenues Expenditures (Note 4): Administration and planning Town attorney Public safety Magistrate caurt Public works Transportation Capital outlay Tatal expenditures � Excess of expenditures over ` revenues Operating transfers Fund balance, beginning Fund balances (deficit), ending � .: ;_ ��... �:. : _, ( 73,950) ( 10, 360) 43,631 (� 40, 679) 3 ; � Totals (Memorandum Only) 1986 1985 $ 331,400 $ 275,974 8,871 1,216 34,044 26,826 985,364 7.191 _1,366,870 122,724 15,024 217,656 28,222 122,334 26,668 _ 910,312 1,442,940 ( 76, 070) -0- 48,471 (� 27.599) � 878,479 1.944 1,184,439 71,560 11,203 199,322 24,053 109,051 19,420 755,138 1.189.747 ( 5,308) -0- 53,779 $ 48,471 See notes to financial statements. TOWN OF MAR.ANA, ARIZONA COMSINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES 12,139 5,909 3,144) 6,247) 223 ( 3.259) 8,880 10,360 ( 6,160) 13 080 $ 284,333 47,500 General Variance Favorable Actual Budc�et (Unfavorable) $ 331,400 8,871 34,Q44 7,191 381,506 122,724 15,024 217,656 28,222 383,626 2,120) 10,360 4.840 � 13,080 27,189 10,345 $ 47,067 ( 38,629) 3 6,855 ( 3.154) 369,367 128,633 11,880 ( 211,409 ( 28,445 _ 380,367 ( 11, 000) -0- 11,000 � -0- The Town did not budget certain Federal grant revenues and expenditures for fiscal 1986. Revenues: Taxes Licenses and permits Fines, forfeitures and penalties " Grants and contributions on Federal and State programs Miscellaneous Total revenues Expenditures: Administration and planning Town attorney Public safety Magistrate court ' Public works Transportation � Capital outlay Tota1 expenditures Excess of expenditures over `revenues � Operating transfers Fund:balance,beginning Fund balance, ending Ca) YEAR ENDED JUNE 30, 1986 IN FUND BALANCES - BUDGET AND ACTUAL . GENERAL AND SPECIAL REVENUE FUND TYPES - EXHIBIT � .� : �: � �� 4 $ 155,525 _ I55,525 133,632 17,705 4,188 155,525 -0- -0- $ -0- $829,839 (a) 829.839 11,298 ( 8,963) ( 906,124) (a) ( 903.789) ( 73,950) ( 10, 360) 43,631 (� 40,679) See notes to financial statements. $ 985,364 985,364 122,334 26,668 910 312 1.059 314 ( 73,950) ( 10, 360) 43.631 (� 40 679) _ Special Revenue Variance Favorable Actual BudQet (Unfavorable) �� TOWN OF MARANA, ARIZONA NOTES TO CC?MBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1986 1. Summary of significant accounting policies: The Town of Marana was incorporated on March 21, 1977, under the provisions of the Constitution of Arizona and the Ari- zona Revised Statutes. The Town operates under a Council- Mayor form of government. All funds and entities related to : the Town that are controlled by the Mayor and Council are included in this annual financial report. This control is determined on the basis of budget adoption, taxing author- ity, and the ability to issue outstanding debt secured by -revenues or which is a general obligation of the Town. The Town provides a full range of services including general governmental administration, legal services, public safety, public works and transportation. The accounting policies of the Town conform to generally accepted accounting principles as applicable to governments. The following is a summary ` of the more significant policies: ` A. Fund accounting: The accounts of the Town are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self- balancing accounts that comprise its assets, liabili- ties, fund equity, revenues, and expenditures. Government resources are allocated to and accounted for 4: in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped, in the financial statements in this report, into two generic fund types and one broad fund category as follows: Governmental funds: General fund - This fund is the general operating fund of the Town. It is used to account for all financial resources except those another fund. S required to be accounted for in pecial revenue funds - These funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified pur- poses. } �� . . 5 TOWN OF MAR.ANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED} YEAR ENDED JUNE 30, 1986 1. Summary of siqnificant accounting policies (continued): Debt service fund - Although such a fund is normally used to account for the accumulation of resources for the payment of general lor.g-term debt principal, interest and related costs, the Town has not estab- lished such a fund since the long-term debt is primar- ily the result of lease-purchase agreements that are funded directly from governmental funds with no amounts accumulated. B. Measurement focus, ties: fixed assets and long-term liabili- The accounting and reporting treatment applied to the fixed assets and long-term liabilities associated with a fund are determined by its measurement focus. A11 governmental funds are accounted for on a spending or "financial flow" measurement focus. This means that only current assets and current liabilities are gener- ally included on their balance sheets. Their reported fund balance (net current assets) is considered a measure of "available spendable resources." Govern- mental fund operating statements present increases (revenues and other financial sources) and decreases (expenditures and other financial uses) in net current assets, as appropriate. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Fixed assets used in governmental fund type operations (general fixed assets) are accounted for in the general fixed assets group of accounts, rather than in govern- mental funds. Public domain ( infrastructure") general fixed assets consisting of certain improvements other :than buildings, including roads, curbs and gutters, streets and sidewalks, bridges, and lighting systems, are not capitalized. However, the Town has elected to capitalize a levee in its accounting records. No depre- ciation has been provided on general fixed assets. All fixed assets are valued at historical cost. Donated fixed assets are valued at their estimated fair value on the date donated. Long-term liabilities expected to �e financed from governmental funds are accounted for in the general long-term debt group of accounts, not in the govern- mental funds. 6 �� .:� e .__. , . . , . � TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1986 1. Summary of significant accounting policies (continued): Because of their spending measurement focus, expendi- ture recognition of governmental fund types is limited to exclude amounts represented by noncurrent liabili- ties. Since they do not affect net current assets, such long-term amounts are not recognized as govern- mental fund type expendit�res or fund liabilities. They are instead reported as liabilities in the general long-term debt group of accounts. The aforementioned two account groups are not funds. They are concerned only with the measurement of finan- ` cial position. They are not involved with measurement of results of operations. The Town no longer carries any inventory. Supplies needed for operations are now being purchased on an as- needed basis. C. Basis of accounting: Basis of accounting refers to when revenues and expen- ditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. The governmental funds are maintained on a modified accrual basis. The modified accrual basis of ac- counting recognizes expenditures on an accrual basis, but revenues are recognized when received, except for material revenues determined to be both measurable and "available." "Available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. D. Budgets and budgetary accounting: The budgets formally adopted by the Mayor and Council are prepared on a purpose, not object-basis. All appro- priations lapse at year end, and the budgetary infor- mation reflected on the financial statements repre- sents the original adopted budget for fiscal 1986 with no augmentations. . 7 � � eral fund and spec F. Reserves: No reservations of fund balance: by the Mayor and Council at the G. Compensated absences: Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order�to reserve that P ea t as an the app licable appropriation, is not employ extension of formal budgetary integration in the gen- ial revenue funds. 1. Summary o sig , E. Encumbrances: TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1986 f ' nificant accounting palicies (continued): have been established end of fiscal 1�86. In the governmental funds, the entire accumulated lia- bility for 'compensated absences is accrued, since it is difficult to break down long versus short-term amounts. Amounts accrued at June 30, 1986, aggregate $28,416 and $3,394 in the general and special revenue funds, respectively. H. Comparative data: Comparative total data for the prior year has been pre- 'sented in the accompanying general purpose financial statements in order to provide an understanding of '`changes in the Town's financial position and opera- tions. I: Total columns on the combined financial statements: Total columns on the combined financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns does not present financial position or results of operations in conformity with generally accepted accounting principles. Neither is such data `comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. 8 � � ,��n _ �_ __ :_ $ 27,687 41,523 40,625 7,425 117,260 ( 13.458) $103.802 � TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1986 $ 7,134 123,412 160,446 192.931 $483,923 $133,122 13,500 ( 38,556) �108,066 (a) The following is a schedule by years of the future min- imum lease payments under capital leases together with the present value of the net minimum lease pay- , ; ments as of June 30, 1986: Balances-July 1, 1985 $128,597 $ 4,525 Capital leases entered 13,500 Retirements ( 38.295) ( 261) 'Balances-June 30, 1986 $103,802 � 4,264 3 3. Changes in general long-term debt: The following is a summary of general-long term debt trans- actions for fiscal 1986: Capital Land Leases (a) Contract(b) Total other assets 176,748 25.516 ($ 9,333) $454,240 $ 39,015 ($ 9,333) Land $ 7,134 _ Land improve- ments 123,412 Assets under capital lease 146,946 $ 13,500 Machinery, equipment and in general fixed Balance Balance July 1, 1985 Additions Deletions June 30. 1986 Z. Changes in general fixed assets: The following is a summary of the changes assets for fiscal 1986: Year ending June 30: 1987 1988 1989 1990 Total net minimum lease payments Less amount representing interest Present value of net minimum lease payments ��, � � � � � t �< 3. 4. TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED} YEAR ENDED JUNE 30, 1986 Changes in general long debt (continued): (b) In 1979, the Town borrowed $7,134 at 7g interest from the State of Arizona to purchase a 2.5 acre parcel of land. Principal and interest is payable in yearly in- stallments of approximately $550. Additional disclosures: The Town does not budget on an object basis; therefore, the expenditures on the general purpose financial statements have been grouped by purpose, which is the Town's budgetary approach. AZthough this facilitates budget to actual com- parisons, the following analysis is necessary to analyze expenditures by current, capital and debt service (capital lease payments) categories: Purpose Administration and plar_ning Town attorney Public safety Magistrate court Public works � Transportation Capital outlay/projects Current Operations $110,840 15,024 209,760 24,313 117,411 Capital Debt outlay Service $ 11,348 3,909 4,923 $ 536 7,896 26,668 894,490 15,822 �477,348 �914,670 $ 5��,g22 The Town budgets by purpose and not by fund; however, the budgeting by purpose closely correlates to what would be, in substance, budgeting by fund. There were no excesses of ex- penditures over agpropriations for fiscal 1986 by fund except as follows: Fund General Local Transportation Assistance Fund Federal Revenue Sharing Bureau of Reclamation CDBG - County CDBG - State Expenditures $ 383,626 26,668 21,594 819,213 68,355 1,358 Appropriations $ 380,367 17,705 4,188 -0- -0- -0- All of the above excesses are the result of Federal fund and debt service payments not budgeted. 10 TOWN OF MARANA, AI2IZONA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1986 ;, Pension plan: The public safety personnel participate in the Arizona Pub- 1ic Safety Personnel Retirement System. Contributions by the :Town to the System are subject to actuarial valuations and the Town's position.in Contri ut ns for fiscal g 1986 h by the yet.been determined Town approximated $6,200. _ ;_ continaencies: rown is subject to having audits performed on certain t programs. Contingent liabilities to grantors, if any, result of completed and possible future audits are not rminable at year end. Town management feels no such ilities exist at June 30, 1986, even though it is in the ess of clearing some prior audit findings regarding k Grant contract wage standards monitoring. Town is currently defendant in a wrongful death lawsuit. attorney for the Town's insuranca carrier feels that the �'s insurance coverage will be adequate to handle this :m . :' Town is continuously liable in respect to other claims .dental to the ordinary coursa of its operations. At June 1986, it is the opinion of Town management, based on the .ce of the Town Attorney, that any such claims would not a a material effect on the Town's financial position. 11 � . _ _----. __ _ .. L��l�� r 11� _� _. T _ . _ . _ _ _ _ _ __ _ ----- � T��1�, ULn_ -- - - _ _ .- -- _ - - -- - r; - �� , .. �i: `.z , �,., . .,, ' , ,.. l ...,....i��... . . . � . � � 'i�', :.il � ., .�. � i,i � � � !�' � . . . . _. _._ _'i; :� . Honorable Mayor and Town Council ; Town of Marana Marana, Arizona �, We;have examined the general purpose financial statements of the . Town of Marana, Arizona, for the year ended June 30, 1986,-and �$ have issued our report thereon dated October 7, 1986. As part of our examination, we made a study and evaluation of the internal � control systems, including applicable internal administrative Y controls, used in administering Federal financial assistance � programs, to the extent we considered necessary to evaluate the i. systems as required by generally accepted auditing standards, the standards for financial compliance audits contained in the U.S. k General Accounting Office's Standards for Audit of Governmental � Organizations, Programs, Activities, and Functions, the Single � Audit,Act'of 1984, and the provisions of OMB Circular A-128, � Audits,: of State and Local Governments . For the purpose of this report, we' have classified the significant internal accounting � � arid administrative controls used in administering Federal financial assistance programs in the following categories: finan- ��.cial` management; cash receipts/revenue; cash disbursements/ ��purchases;��payroll, and general ledger. � � � � The management of the Town is responsible for establishing and �maintaining internal control systems used in administering �Federal financial assistance programs. In fulfilling this respon- 'sibility, estimates and judgments by management are required to as'sess��the expected� benefits and related� costs of control proceclures : � The � ob�j ectives of such systems are to provide man- �'agement `with reasonable, but not absolute, assurance that, with �respect:to`Federal financial assistance programs, resource use is �s �consi`stent ; with law, regulations and policies; resources are afeguarded against waste, loss and misuse; and reliable data is �obtained, maintained, and fairly disclosed in reports. Secaus �e"; , of�inh�erent��lim_itations in any systems of internal ac- �'cflunting and administrative controls used in administering Feder- alsfinancial assistance programs, errors or irregularities may nevertheless occur and not be detected. Also, projection of any �eval the systems to future periods is subject to the �risk that procedures may become inadequate because of changes in � �onditions or that the degree of compliance with the procedures may deteriorate. � � oiir`,�stucly ��included all of the applicable control categories listed`above. Du ' ring the year ended June 30,,198,6, the Town �.e�pended 98� of its total Federal financial assistance under a ;�aJor Fede:ral financial assistance program. With respect to ��internal control systems used in administering this major Federal �. �� 12 � v � eiy ; �� .�;ti� � � � � Honorable Mayor and Town Council Page 2 Town of Marana financial assistance program, our study and evaluation included considering the types of errors and irregularities that could occur, determining the internal control procedures that should prevent or detect such errors and irregularities, determining ,whether the necessary procedures are prescribed and are being followed satisfactorily, and evaluating any weaknesses. With respect to the internal control systems used solely in administering the nonmajor Federal financial assistance programs of the Town, our study and evaluation was limited to a prelimin- ary review of the systems to obtain an understanding of the Lont�ol environment and the flow of transactions through the ac- :ounting system. Our study and evaluation of the internal con- trol systems used solely in administering the nonmajor Federal �inancial;assistance programs of the Town, did not extend beyond this,preliminary review phase. � �ur study`and evaluation was more limited than would be necessary ;o express an opinion on the internal control systems used in �4dministering the Federal financial assistance programs of the 'own . Accordingly, we do not express an opinion on the internal ;'ontrol, systems used in administering the Federal financial ;"ssistance programs of the rown. Further, we do not express an ,�. !pinion on the internal control systems used in administering the a�or Federal financial assistance programs of the Town. lso,t our� examination,� ma�de in accordance with the standards 'entioned; above, would not necessarily disclose material eaknesses in the internal control systems used solely in dministering nonmajor Federal financial assistance programs. �wever,`'.�our study�and evaluation and our examination disclosed '1e following conditions that we believe result in more than a � �latively low risk that errors or irregularities in amounts that u1d be material to a Federal financial assistance program may :cur and not be detected within a timely period. � � r Condition;' �`_ During our examination, we noted that $68,355 was borrowed = from a financial institution and not recorded on the general � ledger. These��monies were borrowed endin bursement in fiscal 1987, and a cashie r�s check d awn in name of a'creditor was forwarded directly to the creditor. ` ` 13 b yt 1. 1 .e� Honorable Mayor and Town'of Marana Recommendation: Town Council Page 3 We recommend that all transactions of the Town be recorded in the general ledger and that disbursements be handled through tl�e normal bank accounts of the Town. This will help insure the completeness of the Town's financial re- cords. Response: 'Management agrees and will make sure this isolated incident does'not occur in the future. tion: Town currently budgets by purpose and not by object. In ition, budgets are not augmented on an ongoing basis, re- ting in difficulty in comparing actual activity with geted activity. mendation• agement should budget by object and augment this budget a periadic basis, especially for Federal programs, so as insure the ability to compare budgeted and actual data in .eaningful manner. The benefit is an improved means by ch management can make decisions and insure adherence to getary requirements. nse: agement intends to reasses the pares and monitors its budget. tion: basis upon which the Town ual expenditure activity in the general ledger was some- es distributed' to� accounts which were not indicative of :riature of the expenditures. For example, the general d=planning and`zoning account contained capital outlays, t service payments, insurance and other such payments t did not directly relate to planning and zoning activi- s .�=. . � `� _r.�� . � � � � 14 I _ �� :� norable Mayor and Town Council wn of Marana Recommendation: Page 4 To promote the usefulness of the general ledger, we suggest that expenditures be distributed to accounts that more truly reflect the nature of the disbursements. This may result in the need to expand the number of general ledger accounts now being used. Response: Management will address this comment in conjunction with the potential revision of Marana's general ledger system, as subsequently discussed. . Condition: Marana's general ledger system is currently in need of eval- uation for: A. �It is not segregated by fund. B. It is not updated throughout the year for account group transactions related to fixed asset and long-term debt activity. C. It is primarily year end when crual activity in the area of tures/payables. Recommendation: maintained on a cash basis, except for accruals are posted. However, such ac- is not a�ways being captured, primarily grant revenue/receivables and expendi- The Town needs to assess the benefits versus the costs of implementing an accounting system that is more canducive to preparing financial information in accordance with generally accepted accounting principles. The costs will be in terms of personnel time and hardware and software expenditures, if a computerized system is decided upon, while the benefits are in the area of improved financial information. Response: Management intends to address a potential change in the ac- counting system in the near future. 15 k_ ' - � norable Mayor and Town Council wn of Marana . Condition: Page 5 During our examination, we noted that the Town does not have a prescribed policy to insure that contractor labor stand- ards are being monitored on its Federal grant programs, other than to rely on its independent engineer to enforce, through periodic inspections in conjunction with contrac- tar requests for payment, standard contractual clauses re- garding such items as discrimination and equal employment opportunity. Recommendation: We feel that management should establish a procedure which will help insure that all labor and other standards are being met by subcontractors on grant programs. This procedure should include the formal maintenance of records supporting compliance at�the Town. It appears that it would be natural for the engineer to continue to monitor compliance, but in a more formal manner. Response: Management intends to formally assess what the Town's com- pliance requirements are and work with the engineer to help establish more formal procedures for monitoring and docu- menting compliance with laws and regulations related to con- tractors. These conditions were considered in determining the nature, tim- ing, and extent of the audit tests to be applied in (1) our examination of the 1986 general purpose financial statements and (2) our examination and review of the Town's compliance with laws and regulations noncompliance with which we believe could have a material effect on the allowability of program expenditures for major Federal financial assistance and nonmajor Federa� financial assistance programs. This report does not affect our reports on the general purpose financial statements and on the Town's compliance with laws and regulations dated October 7, 1986, and February 23, 1987, respectively. This report is intended solely for the use of management and its grantor agencies and should not be used for any other purpose. This restriction is not intended to limit the distribution of this report, which, upon acceptance by the Town, is a matter of public record. � � � • , February 23, 1987 16 - _- _ � LT�� __- - _ _ ` _Z�LtiTULU _ _ � .�;,,;�,�. . _:; � � .. . .. ; �, . .';.. - , :� . ,�i. _,i�i ,�t��.i . ;- . i:;��_)' - - ,., " Honorable Mayor and f Town of Marana ; Marana, Arizona ;�,.� . . Town Council We have examined the general purpose financial statements of the Town of Marana, Arizona, for the year ended June 3Q., 1986, and have issued our report thereon dated October 7, 1986. our examination was made in accordance° with generally accepted auditing standards; the standards for financial and compliance audits contained in the Standards for Audit of Governmental Organizations, Programs, Activities, and Functions, issued by the U.S. General Accounting Office; the Single Audit Act of 19841 and the provisions of OMB Circular A-128, Audits of State and Local Governments and, accordingly, included such tests of the ac- counting records and such other auditing procedures as we considered necessary in the circumstances. The management of the ,Town is responsible for compliance with laws and regulations. In connection with the examination refer- red to above, we selected and tested transactions and records from the major Federal financial assistance program and certain nonmajor Federal financial assistance programs. The purpose of our testing of transactions and records from those Federal financial assistance programs was to obtain reasonable assurance that the Town had, in all material respects, administered major programs, and executed the tested nonmajor program transactions, in compliance with laws and regulations, including those per- taining to financial reports and claims for advances and reim- bursements, noncompliance with which we believe could have a material effect on the allowability of program expenditures. our testing of transactions and records selected from the major Federal financial assistance program disclosed the following possible instance of noncompliance with those laws and regula- tions. This instance is identified below. The Town is currently helping to administer a contract for a construction project funded by the U.S. Department of the Interior, Bureau of Reclamation, which represents 98� of Federal assistance flowed through the general ledger in fiscal 1986. In conjunction with this contract, Bureau representatives feel the Town was supposed to, in conjunc- tion with its consultants, prepare and issue specifications, award the contract and administer the contract through completion. However, the Bureau has exercised such control over the project that it has taken on much of the afore- mentioned responsibilities. Pursuant to feedback from the Town's consulting engineer and Attorney, Town management views the construction contract as between the Bureau and the prime contractor. Town management feels it is only in 17 'onorable Mayor and Town Council �own of Marana Page 2 the position of serving as an administrative agent and a conduit for funds from the Bureau to the contractor invol- ved. Consequently, the Town's management feels it does not have the responsibility to monitor wage standards compliance by the contractor. As a result, no wage standards documen- tation was a�ailable at the Town for us to examine in order to establish compliance with, for exampZe, the Davis-Bacon Act. Although we feel that the Town needs to establish a system to insure that it is documenting its adherence to all applicable contractor laws and regulations, as discussed in the report on internal accaunting contral,the question as to who has responsibility for monitoring wage standards needs to be cleared up and compliance documented. We have not guestioned any costs associated with this contract, since it appears that all such costs are consistent with the major requirements set forth in the contract. This determination is based on the following: 1. 100$ of the voices and sent to the bursement. costs on this project were vouched to in- ather supporting documentation, which were Bureau of Reclamation for review and reim- 2. All contractor's progress payments were approved for pro- priety by the Town's independent consulting engineer. 3. The Town's engineer indicated that, although no formal wage standards monitoring was documented by the Town, the wage scale conformed to Arizona Department of Transporta- tion contracts. 4. The engineer also indicated that it appears no discrim- inatory practices were noted during contract admini- stration, and the contract with the construction firm contains a clause requiring non-discrimination. 5. The Bureau had final approval of the award of the con- tract, which was fo the lowest qualified bidder. 6. The Town's responsibility for formal monitoring above and beyond the aforementioned is a point of contention. :n our opinion, subject to the effect of the ultimate resolution �f the possible instance of noncompliance referred to in the �receding paragraphs, for the year ended June 30, 1986, the °own administered its major Federal financial assistance program .n compliance, in all material respects, with laws and,regula- :ions, including those pertaining to financial reports and :laims for advances and reimbursements, noncompliance with which �e believe could have a material effect on the allowability of �rogram expenditures. 18 norable Mayor and Town Council wn of Marana Page 3 The results of our testing of transactions and records selected from nonmajor Federal financial assistance programs indicate that 'for the transactions and records tested the Town complied with the laws and regulations referred to in the second paragraph of `our report. Our testing was more limited than would be necessary 'to express an opinion on whether ths Town administered those pro- ;grams in compliance in all material respects with those laws and 'regulations noncompliance with which we believe could have a material effect on the allowability of prQgram expenditures; however, with respect to the transactions and records that were �not tested by us, nothing came to our attention to indicate that the Town had not complied with laws and regu�ations. � �'1G��o � � February 23, 1987 a ', 19 - _ _ - _ . _ L1 L � --__ _ _ - - - - r � 111��' ��. _i:i;��; i'>>t,�i��_�� ;i;��l��!� i� :. i•I _ ;'��,� � i , � � i� , ��..;I...:'ivi�ii;l , -i� � ' ��_)i�'_''.�.:�� .� Honorable Mayor and Town Counc?1 Town of Marana Marana, Arizona We have examined the general purpose financial statements of the Town of Marana, Arizona, for the year ended June 30, 1986, and have issued our report thereon dated:October 7, 1986. Our exam- ination of such general purpose financial statements was made in accordance with generally accepted auditing standards and the standards for financial and compliance audits contained in the Standards for Audit of Governmental Organizations, Programs, Activities, and Functions, issued by the U.S. General Accounting Office, and accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. Our examination was made for the purpose of forming an opinion on the general purpose financial �tatements taken as a whole. The accompanying schedule of Federal financial assistance is pre- sented for purposes of additional analysis and is not a required part of the general purpose financial statements. The informa- tion in that schedule has been subjected to the auditing proce- dures applied in the examination of the general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. ac.. V � Q�.t�'4�p � October 7, 1986 20 W U � E-� � H � � U� � � � � ; � � r�-I . 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