The URL can be used to link to this page

Home My WebLink About1987 Financial Statement June 30� • , � TOWN OF MARANA, ARIZONA YEAR ENDED JUNE 30, 1987 .� ; fr��`�t►� vcm i.�:�nr�r�'.' �,RCHftJ�.�� t�� 3F.�;��3� � . , "s � �� e �3 ��ui�tf� __ �r � _ - December 4, 1987 � �� /''�" Honorable Mayor Town of Marana Marana, Arizona and Town Council I. have examined the general purpose financial statements of the Town of Marana, Arizona, as of and for the year ended June 30, :1987, as listed in the table of contents. My 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 I considered necessary in the circumstances. As described in Note 7, the Town is currently in the process of dealing with the Audifor General's Office, Attorney General's Office, and the Legislature of the State of Arizona regarding interpretations of the Arizona Revised Statutes and Constitution, relative to whether or not the Town has overexpended its fiscal 1987 and 1986 alternative expenditure limitations. The Town _` attorney and management feel that the Town has not exceeded its - mandated limitations; however, the ultimate resolution of this matter cannot be presently determined. In my opinion, subject to the effects, if any, as might have been re9uired had the outcome of the uncertainty referred to in the preceding paragraph been known, the general purpose financial ' statements referred to above present fairly the financial posi- tion of the Town of Marana, Arizona, at June 30, 1987, and the results of its operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. � y TOWN OF MARANA, ARIZONA COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS - EXHIBIT 1 JUNE 30, 1987 Assets Cash Accounts and grant.s receivable Amounts to be provided Fixed assets (Note 3) Total assets Liabilities and Fund Equity Liabilities: Accounts payable and accrued expenses Retainage payable Note payable bank, short-term Long-term debt (Note 4) Total liabilities Commitments and contingencies tNotes 4 and 7) Fund equity: Investment in fixed assets Unreserved fund balances Total fund equity Total liabilities and fund equity Governmental _ Fund Types Special General Revenue � 16,082 13,489 � 26,060 54,361 � 29,571 � 13,785 13,785 15,786 15,786 � 80,421 � 49�,191 49,191 31,230 31,230 � 29,571 � 80;421 I �1 ze �60 61 I 21 I �1 ) ) � 2 � Totals (Memorandum Only) 1987 1986 $ 42,142 67,850 151,669 552,316 � 813,977 � 62,976 151,669 214,645 552,316 47,016 599,332 � 92,998 646,018 116,594 483,923 $1,339,533 � 577,541 20,277 68,355 116,594 782;767 483,923 72,843 556,766 � 813,977 �1,339,533 See notes to financial statements. Account Groups General General Long- Fixed Assets Term Debt $ 151,669 � 552,316 � 552,316 � 151,669 � 151,669 151,669 � 552,316 552,316 $ 552,316 � 151,669 �. h TOWN OF MARANA, ARIZONA COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES - EXHIBIT 2 YEAR HNDED JUNE 30, 1987 General Revenues: Taxes Licenses and permits Fines, forfeitures and penalties Grants and contributions on Federal and State programs Miscellaneous Total revenues Expenditures (Note 5): Administration and planning Town attorney Publ ic safety Magistrate court Public works Transportation Capital outlay/projecfs Total expenditures Excess (deficiency) of revenues over (under) expenditures Operating transfers Fund balances, beginning (Note 2) Fund balances, ending � 324,439 40,907 21,797 7,025 394,168 148,682 15,148 232,524 27,134 . , - . ( 29,320) 3,6'f 1 41,495 � 15,786 Speci�l Revenue � 342,148 1,406 343,554 11,73$ 132,284 20,001 176,038 340,061 3,493 ( 3,611) 31,348 $ 31,230 � �ES , al �ue 148 406 �54 738 '.84 )01 ►38 �61 93 111 48 30 3 � Totals (Memorandum Only) 1987 1986 � 324,439 � 331,400 40,907 8,871 2 � , '79'7 34 , 044 342,148 8,431 737,722 160,420 15,148 232,524 27,134 132,284 20,001 176,038 763,549 ( 25,827) -0- 72,843 � 47,016 See notes to financial statements. 1,053,719 7,191 1,435,225 114,707 15,024 217,656 28,222 122,334 26,668 910,312 1,434,923 302 -0- 72,541 � 72,843 i , TOWN OF MARANA, ARIZONA COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL AND SPECIAL REVENUE FUND TYPES - EXHIBIT 3 YEAR ENDED JUNE 30, 1987 eneral Variance Favorable Actual Budqet ( Unfavorable Revenues: Taxes Licenses and permits Fines, forfeitures and penalties Grants and contributions on Federal and State pragrams Miscellaneous Total revenues Expenditures: Administration and planning Town attorney Public safety Magistrate court Public works Transportation Capital outlay/projects Total expenditures Excess (deficiency) of revenues over (under) expenditures Operating transfers Fund balances, beginning Fund balances, ending (a> � 324,439 40,907 21,797 7,025 394,168 148,682 15,148 232,524 27,134 . ... •- ( 29,320} 3,611 41,495 � 15 , 786 � 319,107 38,000 33,600 1,200 391,907 148,931 14,8$0 235,614 30,605 430,030 ( 38,123) -0- 38,123 $ -0- The Town did not budget certain Federal grant revenues and expenditures for fiscal 1987. � 5,332 2,907 ( 11,803) 5 , 825 2,261 0 249 268) 3,090 3,471 6,542 8,803 3,611 3,372 $ 15,786 ;■ ,...--- GES -� iance �rable ✓orable'j i, 332 �` � �� ? . 907 ,803) ,825 ,261 249 268 ) ` , 090 ,471 542 803 611 372 786 SpeciaT Revenue _ Variance Favorable Actual Budqet ( Unfavorable ) $ 342,148 1,406 $ 170,008 -0- �172,140 (a) 1,406 343,554 11,738 132,284 20,001 176,038 340,061 3,493 ( 3,611) 31,348 � 31,230 170,008 � 154,220 19,719 2,810 176,749 ( 6,741) -0- 6,741 $ -0- 173,546 ( 11,738) 21,936 ( 282) ( 173,228 ( 163,312) 10,234 ( 3,611) 24,607 $ 31,230 See notes to financial statements. � TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1987 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 Arizona 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 ac:counts 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, liabilities, fund equity, revenues, and expenditures. Government re- sources are allocated to and accounted for in indi- vidual 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 f inancial resources, except those required to be accounted for in another fund. Special revenue funds - These funds are used to account for the proceeds of specif ic revenue sources that are legally restricted to expenditures for specified pur- poses. 5 NOTES TO TOWN OF MARANA, ARIZONA COMBINED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1987 1: Summary of significant accounting policies (continued): B. Debt service fund - Although such a fund is normally used to account for the accumulation of resources for the payment of general long-term debt principal, inter- est and related costs, the Town has not established such a fund since the long-term debt �s primarily the result of lease-purchase agreements that are funded directly from governmental funds with no amounts accum- ulated. Measurement focus, fixed assets and long-term liabili- ties: The accounting and reporting treatment applied to the fixed assets and long-term liabilities associated with a fund are determined by its measurement focus. All 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 mea- sure of "available spendable resources." Governmental fund operating statements present increases (revenues and other financial sources) and decreases (expendi- tures 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 re- sources" 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. No depreciation 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 be financed from gov- ernmental funds are accounted for in the general long- term debt group of accounts, not in the governmental funds. � NOTES TO The budgets formally adopted by the mayor and council are prepared on a purpose, not object basis. AIl appro- priations lapse at year end, and the budgetary informa- tion reflected on the financial statements represents the original adopted budget for fiscal 1987 with no augmentations. 7 TOWN OF MARANA, ARIZONA COMBINED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1987 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 governmental fund type expenditures 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. 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 account- ing 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: C. Basis of accounting: $' 1. Summary TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS lCONTINUED) YEAR ENDED JUNE 30, 1987 1. 5ummary of significant accounting policies (continued): E. Encumbrances: Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is not employed as an ex- tension of formal budgetary integration in the general fund and special revenue funds. � F. Reserves: No reservations of fund balances have been established by the mayor and council at the end of fiscal 1987. G. Compensated absences: In the general long-term debt group of accounts, the entire accumulated liability for compensated absences is reflected, since the liability at June 30, 1987, will most likely not be paid within the current ac- counting cycle. Rather, in fiscal 1988 the Town will probably pay that year's accrual without utilizing amounts accrued from prior years. H. Comparative data: Comparative total data for the prior year has been : presented 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. : (b) The Town has been accruing a liability for certain com- pensated absences in the past, including vacation, com- pensatory time and sick leave. However, it has been determined that sick leave is not payable by the Town upon the termination of employment. In addition, an ad- justment has been made to reflect the entire liability for vacation and compensatory time in the general long- term debt group of accounts, since it appears that the Town will pay in the upcoming year only the amounts ac- crued in fiscal 1988 out of the governmental funds. In fiscal 1987, for example, the liability for such compensated absences actually increased due to nonutil- ization of vacation and compensatory time. Conse- quently, the beginning fund balances have been restated to reflect the proper liability at June 30, 1986. G] (CONTINUED) The following prior period adjustments were required at June 2. Prior period adjustments: TOWN OF.MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1987 General Fund �13,080 28,415 �41,495 Special Revenue Fund (�40,679) 68,355 (a) 3,672 (b) $31,348 (a) In June of 1986, the Town borrowed �68,355 from a fi- ` nancial institution cn a short-term basis to pay for street improvements, with the idea that the Block Grant program would supply the funds to reimburse the Town for the expenditures. Originally, it was tliought that the funding was going to come from a Block Grant con- tract that was being negotiated, but had not yet been finalized. Consequently, fhe accrual for the revenue was not booked at June 30, 1986. However, it was subse- quently determined that the revenue was measurable and available at this date, since the eligible reimburses- ments were to come aut of an existing Block Grant contract, not a future contract. Therefore, the prior period adjustment matches the revenue with the appro- priate prior period expenditures. 30 ,' 1986 : Fund balances (deficit) as previously reported � ,�Prio�r�period adjustment to � reflect Community Develop- � ment Block Grant revenue .s � �`Pr��ior period adjustment to ' reflect the proper accrual � �for�compensated absences 'Fund balances as restated TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS {CONTINUED) YEAR ENDED JUNE 30, 1987 3. Changes in general fixed assets: The following is a summary of the changes in general fixed assets for fiscal 1987: Balance Balance July 1, 1986 Additions June 30, 1987 Land � 7,134 � 7,134 Land improvements 123,412 123,412 Assets under cap- ital lease 160,446 $ 56,008 216,454 ` Machinery, equipment and other assets 192,931 12,385 205,316 � 483,923 � 68,393 � 552,316 4. Changes in general long-term debt: The following is a summary of general-long term debt trans- actions for fiscal 1987: Cap"ital Land : Leases (a) Contract Total Balances-July 1, 1986 �103,802 � 4,264 �108,066 Capital leases entered 56,008 56,008 Retirements ( 28,397 ( 253 ( 28,650 Balances-June 30, 1987 $131,413 � 4,011 135,424 Long-term portion of accrued vacation and compensatory time 16,245 Total general long-term debt at June 30, 1987 �151,669 ta): 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 payments as of June 30, 1987: Years ending June 30: 1988 $ 58,650 1989 57,752 1990 23,105 1991 8,720 Total net minimum lease payments 148,227 Less amount representing interest ( 16,814) Present value of net minimum lease payments �131,413 10 TOWN OF MARANA. ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1987 4. Changes in general long-term debt (continued): (b) In 1979, the Town borrowed �7,134 at 7% 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 �575. 5. 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. Although 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 Current Capital Debt pperations Outlay Service �144,171 15,148 231,850 27,134 118,657 224 �537,184 Expenditures Appropriations � 20,001 3,382 107,479 76,915 � 4,179 674 13,312 20,001 3,158 $ 41,324 � 19,719 2,810 -0- -0- The above excesses are the result of Federal fund and debt service payments not budgeted. Fund ��. � Local Transportation Assistance Fund Federal Revenue Sharing Bureau of Reclamation CDBG - County $ 12,070 315 172,656 �185,041 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- h°penditures over appropriations for fiscal 1987 by fund except as follows: Administration and planning Town attorney Publ ic safety Magistrate court Public works Transportation `Capital outlay/projects 11 ,�------ TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1987 �6; 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 k�. _ the Town's position in the System at June 3D, 1987, reflects �-' an unfunded actuarial accrued liability of �2,768, taking �. into consideration �51,334 of accrued assets, �139,389 of �` prospective assets and �193,491 of prospective payments. �= Contributions for fiscal 1987 by the Town approximated � �. e �5 , 200 :� �� : ��° 7.�:� Con� i ngenc i es : � � �;' The Town is subject to having audits performed on certain grant programs. Contingent liabilities to grantors, if any, as a'result of completed and possible future audits are not determinable at year end. Town management feels no such lia- bilities exist at June 30, 1987, even though it is in the process of clearing some prior audit findings regarding Block Grant contract wage s�andards moniforing. �: The Town is continuously liable in respect to other claims incidental to the ordinary course of its operations. At June 30, 1987, it is the opinion of Town management, based on the advice of the Town attorney, that any such claims would not have`a material effect on the Town's financial position. �� The Town of Marana voters approved alternative expenditure limitations for both fiscal 1987 and 1986.. Upon a review of � the documents pertaining to the alternative expenditure limitations, the Auditor General's Office of the State of Arizona indicated that the Town would most likely not be able to utilize those exclusions that are normally allowed �'µ by the Arizona Constitution, since such exclusions were not specifically authorized by the voters. The Town attorney and management feel that such exclusions should, nevertheless, �;` be allowed based upon an analysis of the applicable sections of the Arizona Constitution and the Arizona Revised Sta- tutes. Without the allowance of these exclusions, the Town has put itself in the position of possibly exceeding its expenditure limitations for both fiscal 1987 and 1986. In June of 1987, a public hearing was held regarding the 1986 fiscal year. This meeting resulted in a. request by the Auditor General's Office to the Attorney General's Office of the` State of Arizona to formally interpret the applicable laws for purposes of determining as to whether or not the Town had overexpended. To date, no opinion has been received fxom the Attorney General. 12 �� .�..m_� _ : NOTES TOWN OF MARANA, ARIZONA TO COMBINED FINANCIAL STATEMENTS (CONTINUED? YEAR ENDED JUNE 30, 1987 ,�", 7�:��Cont�ingencies (continued): � Currently, remedial legislation has been drafted and is i „ pending �efore the Legislature of the State of Arizona that, �� =��if�pa��ed�,� would, in the opini.on of the Town attorney�and � ' management, result in the Town being able to utilize the �'` `��statutory� exclusions, thus adhering to mandated expenditure �'<� limitations. If this legislation is not approved, or the �� ;',Attorney General issues an opinion that would be detrimental ��` #��«�to the��Town, then the Town �is subject to the�following ` �<.°;ramifications: = � �� , �1�: For f iscal 1�986, the Town �, �� third of its State income � �-# �,.� � �88 , 670 . ��:.�� ..�� .� � � � could possibly lose up to one- tax monies, which aggregated 2: For fiscal 1987, the Town could possibly lose between one-third and all of its State income tax monies, which aggregated �86,259, since this would potentially be the second consecutive year of overexpenditure. 'here are still a large number of uncertainties to be �leared-up. For example, the Town attorney still feels that ertain special revenue fund revenues and expenditures may epresent agency transactions. The overall feeling of the 'own attorney and management is that the Town will prevail nd not have any State income tax monies withheld. 13 f {� . ._ . .. : � .. . .�£ �, �� , �'. �� . . . .. . . . F. �,� L�.' ��'.t'... .. �:�� Honorable Mayor and Town Council Town:of Marana Marana, Arizona �. � �,�.I� fiave examin'ed the general purpose financial statements of the � �_�'own of Marana , Ar i zona , f or the year ended June 30 , 1987 , and �'have issued my report thereon dated December 4, 1987. As part of � my e�Xamination I made a study and evaluation of the internal contro`1 systems, including applicable internal administrative ��controls,�� used in administering Federal financial� assistance =progTams,'to the extent I considered necessary to evaluate the systems as required by generally accepted auditing standards, ' including`the standards for financial compliance audits contained �::in-=the U.S. General Accounting Office's Standards for Audit of �G�over�imental��0rganizations, Programs, Activities, an�d Functions, �the{Single Audit Act of 1984, and the provisions of OMB Circular � A.'128; Audits of State and Locai Governments. For the purpose of ;;t report , I have classif ied the signif icant internal account- i'ng�=�and 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 mainfaining internal control systems used in administering Federal financial assistance programs. In fulfilling this respon- � sil�il.�ity,��esfimates and judgments by management are required to � assess the expected benefits and related costs of control pro- ced'utes: The objectives of such systems are to provide management � With �;reasonable, but not absolute, assurance that, with respect to Federal financial assistance programs, resource use is consis- ' tent ;with law, regulations and policies; resources are safe- gi�arded against waste, loss and misuse; and reliable data is '� o��ai:ried, maintained, and fairly disclosed in reports. ..;„�� . , . . �� Because of inherent limitations in any systems of internal ac- �count`ing and administrative controls used in administering ��, Feder""al financial assistance programs, errors or irregularities � may��ne�er�thel�ess occur and not be detected. Also, projection of �'any`ev�aluation��of�the sy�stems to future periods is�subject to the ri,sk'`that procedures may become inadequate because of changes in conditions or that the degree of compliance with the procedures � °may deteriorate. � �. _ � � � � � � � Braaa;�ay�, S°�E;,., �'�, , _�., _� ..� � _ _. _., _ � 14 Honorable Mayor :Town> of Marana and Town Council Page 2 fy study included all of the applicable control categories listed bove:` During the year ended ,7une 30, 1987, the Town expended �8°0' of its total Federal financial assistance under two major ederal financial assistance programs. With respect to internal ontrol systems used in administering these major Federal finan- ial assistance programs, my study and evaluation included con- idering the types of errors and irregularities that could occur, etermining the internal control procedures that should prevent r detect such errors and irregularities, determining whether the ecessary procedures are prescribed and are being followed ati'sfactorily, and evaluating any weaknesses. ith respect to the internal control systems used solely in dministering the nonmajor Federal financial assistance programs f the Town, my study and evaluation was limited to a preliminary eview of the systems to obtain an understanding of the control nvironment and the flow of transactions through the accounting pstem. My study and evaluation of the internal control systems sed solely in administering the nonmajor Federal financial ssistance programs of the Town did not extend beyond this pre- iminary'review phase. y_ study and evaluation was more limited than would be necessary o express an opinion on the internal control systems used in dmin`istering the Federal financial assistance programs of the own. Accordingly. I do not express an opinion on the internal ontroT systems used in administering the Federal financial ssistance programs of the Town. Further, I do not express an pinion on the internal control systems used in administering the ajor Federal financial assistance programs of the Town. � � �, � � � � � � �,. Also, my examination, made in accordance with the standards ' mentioned above, would not necessarily disclose all material �:' `weaknesses in the internal control systems used solely in admin- > '"i'stering both major and nonmajor Federal financial assistance rograms. �wever, my study and evaluation and my examination disclosed the �llowing conditions that I believe result in more than a �latively low risk that errors or irregularities in amounts that �uld be material to a Federal financial assistance program may �cur and not be detected within a timely period. . Condition: I f' 68 355 b d f n iscal 1986, I commented that �, was orrowe rom a financial institution and not recorded on the general led- ger. These monies were borrowed pending grantor reimburse- ment in fiscal 1987, and a cashier's check drawn in the name of a creditor was forwarded directly to the creditor. In conjunction with this situation, I recommended� that all transactions such as this be recorded in the Town's books of original entry. In fiscal 1987, this situation occurred once 15 �norable Mayor and Town Council �wn of Marana again, as ' transmitted institution, Page 3 the monies to repay the �68,355 loan were directly from the grantor to the financial without being recorded in the general ledger. ndation: = ��I agai�n recommend that all transactions of the Town be recorded in the general ledger and that disbursements be ,,"` handled through the normal bank accounts of the Towri. This - will help insure the completeness of the Town's financial `°records. Re -'Management agrees and will make sure this does not occur in �� the ��future. � � � �Condition: The Town still budgets by purpose and not by object. In ;addition, budgets are not augmented on an ongoing basis, `.resulting in difficulty in comparing actual activity with �.`��=bud�ge acti�vity. � � ,Recommendation: Management should budget by object and augment this budget on a periodic basis, especially for Federal programs, so as to insure the ability to compare budgeted and actual data in 'a meaningful manner. The benefit is an improved means by which management can make decisions and insure adherence to -�'budgetary requirements. �� `Response: °Management intends to reassess the basis upon which the Town �; prepares and monitors its budget in conjunction with the new ':accounting system it is in the process of implementing. "Condition: € �� .;: � � �.'During the current examination, it was discovered that in the.past expenditure activity in the general ledger was sometimes distributed to related revenue accounts, for ' example, building permit costs. It should be noted that these costs were not material. Recommendation: To promote the usefulness of the general ledger and insure adherence to legal requirements regarding expenditures, I :suggest that expenditures be distributed to appropriate expense accounts. This may result in the need to expand the number of general ledger accounts now being used. 16 `Honorable Mayor Town of Marana Response: and Town Council Page 4 Management has recently addressed this problem in conjunc- tion with the revision of Marana's accounting system that is currently in progress, including its chart of accounts. ; �` 4. Condition: ;. : = Marana's current accounting system is in need of evaluation � � � for. � � � � �' ;: A. It is not segregated by fund. B. It is nof updated throughout the year for account group transactions related to fixed asset and long-term debt activity. C. It is primarily maintained on a cash basis, except for year end when accruals are posted. However, such ac- crual activity is not always being captured, primarily in the area of grant revenue/receivables and expendi- tures/payables. Recommendation: The Town needs to implement an accounting system that is more conducive to preparing financial information in accor- dance with generally accepted accounting. principles. The benefits will be in the area of improved financial informa- tion. Response: Management will have these problems addressed by the time the aforementioned new accounting system is fully opera- tional. 5. Condition: � # f � � �� . The Town is charging to grant funds certain administrative costs that are allowable, but initially borne by other funds. In addition, the Town also transfers monies between funds to cover temporary short falls in cash pending reim- bursement by grantor agencies. This situation creates a great deal of activity between funds and programs. Recommendation: The Town needs to establish formal policies regarding the transfer of monies between funds including: , 1. The method for recording such transactions in the new accounting system. Particular attention should be paid to how revenues and expenditures are recorded, as well as how due to/from accounts are affected, 17 � Honorable Mayor and Town Council Town of Marana Page 5 2. What internal controls are required to make sure that monies are transferred properly, as well as what docu- ments are required to be maintained to support the transfers and any related charges, such as invoices and billings. 6 Such policies will help insure the accuracy of accounting records and adhersnce to grant requirements. Response: Town management will meet with the auditor for determining what formal policies are required to be implemented. , Condition: The Town has not recently conducted a reconciliation of its physical property records and the items reflected in its general fixed asset group of accountse Recommendation: I suggest that a physical inventory of property be conducted in the near future, for example at June 30, 1988, and that a reconciliation of that inventory be made to the general ledger, with all appropriate adjustments being investigated and made. This procedure should be performed periodically to help improve the accountability over fixed assets. Response: The Town, with the help of the auditor, intends to perform the aforementioned physical inventory and general ledger reconciliation as soon as practicable in the future. These conditions were considered in determining the nature, timing, and extent of the audit tests to be applied in (1> my examination of the 1987 general purpose financial statements and (2) my examination and review of the Town's compliance with laws and regulations noncompliance with which I believe could have a material effect on the allowability of program expenditures for major Federal financial assistance and nonmajor Federal financial assistance programs. This report does not affect my reports on the general purpose financial statements and on the Town's compliance with laws and regulations dated December 4, 1987. 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. G ',�,� ,� ��/� � December 4, 1987 18 Honorable Mayor and Town Council Town of Marana Marana, Arizona 1 I have examined the general purpose financial statements of the Town of Marana, Arizona, for the year ended June 30, 1987, and have issued my report thereon dated December 4, 1987. My examin- ation was made in accordance with generally accepted auditing standards; including 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 1984; and the provisions of OMB Circular A-128, Audits of State and Local Governments and, accordingly, included such tests of .the account- ing records and such other auditing procedures as I considered necessary in the circumstances. The management of the Town is responsible for compliance with laws and regulations. In connection with the examination referred to above, I selected and tested transactions and records from the two major Federal financial assistance programs and certain non- major Federal financial assistance programs. The purpose of my testing of transactions and records from those Federal financial assistance programs was to obtain reasonable assurance that the Town had, in material respects, administered major programs, and executed the tested nonmajor program transactions, in compliance with laws and regulations, including those pertaining to finan- cial reports and claims for advances and reimbursements, noneom- pliance with which I believe could have a material effect on the allowability of program expenditures. My testing of transactions and records selected from the major Federal financial assistance programs disclosed the following situation: In fiscal 1986, as well as 1987, it was noted that the Town, due to its manpower structure, can only monitor labor standards on the contractors that perform its road improvements as fol- lows: �, Drafting and awarding contracts under the auspices of the grantor agencies that contain nondiscrimination/wage stan- dards clauses. 2. Forwarding to grantors for contract reimbursement support _such as draw requests, invoices and engineer reports. 19 Honorable Mayor and Town Council Town of Marana 3. Requiring monitoring of all contractors by the Town's pendent engineer for: a. Contract compliance. b. Completion percentages. Page 2 inde- c. Other areas, including adherence to Arizona Department of Transportation specifications. The grantor agencies, from a practical point of view, can expect not much more from the Town. They have been informed of this sit- uation over the years and have not substantially restricted their dealings with the Town. Therefore, it must be assumed that these agencies are satisfied with Town procedures. Consequently, it ap- pears that the Town is in compliance with the expectations of its grantor agencies. Taking into consideration that the aforementioned situation does not represent noncompliance, in my opinion, for the year ended June 30, 1987, the Town administered its major Federal financial assistance programs in compliance, in material respects, with laws and regulations, including those pertaining to financial re- ports and claims for advances and reimbursements, noncompliance with which I believe could have a material effect on the allow- ability of program expenditures. The results of my 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 above. My testing was more limited than would be necessary to express an opinion on whether the Town administered those programs in compliance, in material respects, with those laws and regulations, noncompliance with which I believe could have a material effect on the. allowability of program expenditures. However, with respect to the transactions and records that were not tested by me, nothing came to my attention to indicate that the Town had not complied with laws and regulations. y�� U G � December 4, 1987 20 .. � } �� ' : � .._�': ,,�..`��:� ;.: .`; Honorable Mayor and Town Council Town of Marana Marana, Arizona :�' I have examined the general purpose financial statements of the Town of Marana, Arizona, for the year ended June 30, 1987, and have issued my report thereon dated December 4, 1987. My examina- tion of such general purpose financial statements was made in accordance with generally accepted auditing sfandards, including 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 I considered neces- sary in the circumstances. 1 � , 1 , My examination was made for the purpose of forming an opinion on the general purpose financial statements 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 information in that schedule has been subjected to the auditing procedures applied in the examination of the general purpose financial statements and, in my opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. �' W �� A� I December 4, 1987 21 TOWN OF MARANA, ARIZONA SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE YEAR ENDED JUNE 30, 1987 Other Federal Assistance (a? U.S. Department of the Inter- ior, Bureau of Reclamation, Central Arizona Project, no fixed award amount. U.S. Department of Treasury, Federal Revenue Sharing, fixed ; award amount of �2,727. U.S. Department of HUD, passed " through Pima County, contract Nos. 01=39-M-106343-1085 and 01-39-M-107616-0886, fixed award amount of �326,174. _ Total Federal ass�stance Balance Balance July 1, June 30, 1986 Revenue Expenditures 1987 � -0- �107,479 $107,479 � -0- (b) 655 2,727 3,382 -0- 76,915 76,915 � 655 �187,121 �187,776 (a) CFDA numbers could not be located for these programs. (b) Program closed out. -0- (b) -0- $ -0- 22