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Home My WebLink About1988 Financial Statement June 30�� s �� ` r�,, �� t� �� ° �� TOWN OF MARANA, ARIZON� YEAR ENDED JUNE 30, 1988 i 'I TOWN OF MARANA, ARIZONA YEAR ENDED JUNE 30, 1988 TABLE OF CONTENTS EXHIBIT 1 2 3 ��. h � � Accountant's report General purpose financial statements: Combined balance sheet, all fund types and account groups Combined statement of revenues, expen- ditures and changes in fund balances, all governmental fund types Combined statement of revenues, expen- ditures and changes in fund balances, budget and actual, general and spe- cial revenue fund types Notes to combined financial statements Report on internal accounting control Report on compliance with laws and regu- lations Report on supplementary schedule of Fed- eral financial assistance Supplementary schedule of Federal finan- cial assistance PAGE 1 2 3 4 5-11 12-17 18-19 � 21 � �, � � � Honorable Mayor and Town Council Town of Marana Marana, Arizona I have audited the general purpose financial statements of the Town of Marana, Arizona, as of and for the year ended June 30, 1988, as listed in the table of contents. These financial state- ments are the responsibility of the Town's management. My responsibility is to express an opinion on these financial state- ments based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting `the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the over all financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the general purpose financial statements referred to above present fairly the financial position of the Town of Marana, Arizona, at June 30, 1988, and the results of its opera- tions for the year then ended, in conformity with generally accepted accounting principles. G� L�ti�,1� e� �/�F > December 22, 1988 �� I � � 1 TOWN OF MARANA, ARIZONA COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS - EXHIBIT 1 JUNE 30, 1988 Assets Cash Accounts and grants receivable Amounts to be provided Fixed assets (Note 2) Total assets Liabilities and Fund Equitv Liabilities: Accounts payable and accrued expenses Long-term debt (Note 3) Total liabilities Commitments and contingencies (Notes 3 and 6) Fund equity: Investment in fixed assets Unreserved fund balances Total fund equity Total liabilities and fund equity Governmental Fund Types Special General Revenue $ 29,841 102,122 $131,963 $ 56,192 $ 12,455 56,192 12.455 75,771 11.525 75,771 11,525 $131,963 $ 23,980 $ 9,377 14,b03 $ 23,980 _ Account Groups General General Long- Fixed Assets Term Debt $ 716,369 $ 716,369 $ 716,369 716,369 � 716,369 0 $ 248,265 � 248,265 Totals (Memorandum Only) 1988 1987 $ 39,218 $ 42,142 116,725 67,850 248,265 151,669 716,369 552,316 $1,120,577 $ 813,977 $ 68,647 $ 62,976 $ 248.265 248,265 151,669 248,265 316,912 214,645 716,369 552,316 87,296 47,016 803,665 599,332 � 248,265 $1,120,577 $ 813,977 See notes to financial statements. 2 TOWN OF MARANA, ARIZONA COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPE5 - EXHIBIT 2 YEAR ENDED JUNE 30, 1988 Revenues: Taxes: Sales - Town Sales - State Urban sharing Auto lieu Licenses and permits Fines, forfeitures and penalties Grants and contributions: CDBG funds Highway user fees Bureau of Reclamation LTAF funds Revenue sharing Miscellaneous Total revenues Expenditures (Note 4): Administration and planning Town Attorney Public safety Magistrate court Public works Transportation Capital projects _ Total expenditures Excess (deficiency) of revenues over (under) expenditures Operating transfers Fund balances, beginning Fund balances, ending General $ 233,350 94,214 90,166 30,903 276,848 31,805 Special Revenue $ 204,945 129,991 19,536 14,173 771,459 276,258 58,147 350,071 31,494 354,472 160,584 19,927 189,170 715,970 55,489 4,496 15,786 $ 75,771 369,681 ( 15,209) ( 4, 496) 31,230 $ 11,525 � � � � I Totals (Memorandum Only _ 1988 1987 $ 233,350 94,214 90,166 30,903 276,848 31,805 204,945 129,991 19,536 14,173 1,125,931 $ 118,569 89,899 86,259 29,712 40,907 21,797 76,915 134,966 107,473 19,865 2,929 8,431 737.722 276,258 58,147 350,071 31,494 160,584 19,927 _ 189.170 1,085,651 40,280 -0- 47,016 $ 87.296 160,420 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. 3 ;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, 1988 Revenues: Taxes: Sales - Town Sales - State Urban sharing Auto lieu Licenses and permits Fines, forfeitures and penalties Grants and contributions: CDBG funds Highway user fees LTAF funds Other Miscellaneous Total revenues Expenditures: Administration and planning Town attorney Public safety Magistrate court Public works Transportation Capital projects Total expenditures Excess (deficiency) of revenues over (under) expenditures Operating transfers Fund balances, beginning Fund balances, ending General Variance Favorable Actual Budget (a) (Unfavorable) $ 233,,350 94,214 90,166 30,903 276,848 31,805 $ 175,643 165,649 122,826 29,000 318,246 � � � �, �` ��i $ 57,707 � ( 71,435) �, ( 32, 660) 1,903 �� ( 41,398) � � 31,805 �� 14,173 6,111 8,062 771.459 817,475 ( 46 016) 276,258 58,147 350,071 31,494 575,000 -0- 700,000 100,000 715,970 1,375,000 298,742 ( 58,147) 349,929 68,506 659,030 55,489 ( 557,525) 613,014 4,496 -0- 4,496 15,786 -0- 15,786 $ 75,771 ( $ 557,525 $ 633,296 (a) The Town's budget included an additional $200,000 for a water and sewer ente�cprise activity that was never started. In addition, the budget balances in total by general and special revenue fund types. Special Revenue Variance Favorable Actual Budget (a) (Unfavarable) $ 204,945 129,991 19,536 -0- 354.472 160,584 19,927 189,170 369.681 ( 15,209) ( 4,496) 31,230 $ 11,525 $ 71,000 184,827 26,698 800,000 1,082,525- 525,000 -0- -0- 525,000 557,525 -0- -0- $ 557,525 $ 133,945 ( 54,836) ( 7,162) ( 800,000) ( 728,053) 364,416 ( 19,927) ( 189,170) 155,319 ( 572,734) ( 4, 496) 31,230 ($ 546,000) See notes to financial statements. 4 �� _� � TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1988 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. Al1 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, 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 financial resources, except those required to be accounted for in another fund. Special 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 MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1988 1. Summary of significant 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 long-term debt principal, inter- est and related costs, the Town has not established such a fund since the long-term debt is primarily the result of lease-purchase agreements that are funded directly from governmental funds with no amounts accum- ulated. B. Measurement focus, fixed assets and ties: 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. 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 inc�uded 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 doinain ("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. I �� TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1988 (CONTINUED) l. 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 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 �.<� They are concerned only cial position. They are of results of operations �� account groups are not funds. with the measurement of finan- not involved with measurement 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 s 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 accounting recognizes expenditures on an accrual basis, but reven- ues are recognized when received, except for material revenues determined to be both measurable and "avail- able.'� "Available" means collectible within the current period or soon enough thereafter to be used to pay lia- bilities of the current period. For example, at June 30, 1988, approximately $87,000 of Town sales taxes were recorded as revenue, since they were received soon enough to address fiscal 1988 liabilities. 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, a�d the budgetary informa- tion reflected on the financial statements represents the original adopted budget for fiscal 1988 with no augmentations. � � 7 � � TOWN OF MARANA, ARIZONA � NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) �� YEAR ENDED JUNE 30, 1988 , 1. Summary 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 1988. G. Compensated absences: In the general long-term debt group of accounts, essen- tially the entire accumulated liability for compensated absences is reflected, since the liability at June 30, 1988, will most likely not be paid within the current accounting cycle. Rather, in fiscal 1989 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. �'ti� � ,. �:�.� .., � E3 � '� � ,� TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1988 2. Changes in general fixed assets: The following is a summary of the changes in general fixed assets for fiscal 1988: Balance Balance July 1, 1987 Additions June 30, 1988 Land $ 7,134 $ 7,134 Land improvements 123,412 123,412 Assets under cap- ital lease 216,454 $ 143,849 360,303 Machinery, equipment and other assets 205.316 20,204 225,520 $ 552,316 $ 164,053 $ 716,369 3. Changes in general long-term debt: The following is a summary of general-long term debt trans- actions for fiscal 1988: Capital Land Leases (a) Contract(b) Total Balances-July 1, 1987 $131,413 $ 4,011 $135,424 Capital leases entered 143,849 143,849 Retirements ( 56,590) ( 253) (_ 56.843) Balances-June 30, 1988 �218,672 $ 3,758 222,430 Long-term portion of accrued vacation and compensatory time 25,835 Total general long-term debt at June 30, 1988 248 265 (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 payments as of June 30, 1988: Years ending June 30: `� 1989 � 1990 1991 =,� 1992 1993 1994 � ;� � l $ 95,487 61,585 47,200 32,157 15,988 745 Total net minimum lease payments 253,162 Less amount representing interest ( 34,49p) Present value of net minimum lease payments $218,672 0 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1988 3. 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. 4. 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 Administration and planning Town attorney Public safety Magistrate court Public works Transportation Capital outlay/projects Current Capital Debt Operations Outlay Service $262,795 $ 11,726 $ 1,737 58,147 317,866 -7,534 24,671 30,852 642 137,364 1,090 22,130 19,927 189,170 $807,024 �210,162 $ 68,465 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 operating transfers and expenditures over appropriations for fiscal 1988 by fund except as follows: Operating Transfers Fund and Expenditures CDBG - County Local Transportation Assistance Fund $ 204,945 19,927 Appropriations � � The above excesses are the result of Federal fund and debt service payments not budgeted. 10 � � .� TOWN OF MARANA, ARIZONA �'� � NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) '- YEAR ENDED JUNE 30, 1988 5. Pension plan: �' � The public safet y personnel participate in the Arizona Pub- '. lic Safety Personnel Retirement System. Contributions by the Town to the System are subject to actuarial valuations and �� the Town's position in the System at June 30, 1988, reflects ;�,-� an unfunded actuarial accrued liability of $18,985, taking into consideration $75,614 of accrued assets, $187,439 of k � ; � prospective assets and $282,038 of prospective payments. � Contributions for fiscal 1988 by the Town approximated r $7,600. 6. Contingencies: 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, 1988. The Town is continuously liable in respect to other claims incidental to the ordinary course of its operations. At June 30, 1988, 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. pq � f � U � t � I � 9 � � ��, .� � D. 11 f� {� i � , ,�� :; �_ � _ ,.. . �� Honorable Mayor and Town Council ! � Town of Marana Marana, Arizona I have audited the general purpose financial statements of the Town of Marana, Arizona, for the year ended June 30, 1988, and have issued my report thereon dated December 22, 3988. As part of my audit, I made a study and evaluation of the internal controi systems, inciuding applicable internal administrative controls, used in administering Federal financial assistance programs, to the extent I considered necessary to evaluate the systems as required by generally accepted auditing standards, including the standards for financial and compliance audits contained in the U.S. General Accounting Office's Standards for Audit of Govern- mental 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, I have classified the s,ignificant internal account- ing 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. sibility, estimates and judgments by management are assess the expected benefits and related costs of cedures. The objectives of such systems are to provic with reasonable, but not absolute, assurance that, to Federal financial assistance programs, resource u� tent with laws, regulations and policies; resourcE guarded against waste, loss and misuse; and relia obtained, maintained and fairly disclosed in reports. 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- required to control pro- e management with respect e is consis- s are safe- ble data is Because of inherent limitat�ons in any systems of internal ac- counting and administrative controls used in administering Federal financial assistance programs, errors or ��=� may nevertheless occur and not be detected. Also, any evaluation of the systems to future periods is risk that procedures may become inadequate because a�;� conditions or that the degree of compliance with ��, may deteriorate. � �r,� . ; � � .�. ,-., . ��- , �_ � � � � _... __ _ _� � __�_ 12 irregularities proj ection of subject to the of changes in the procedures i�� Honorable Mayor and Town Council Page 2 ; � Town of Marana I My study included all of the applicable control categories listed above. During the year ended June 30, 1988, the Town did not have any major Federal financial assistance programs and expended 100% �' of its total Federal financial assistance under one nonmajor Community Development Block Grant program. With respect to inter- �:� nal control systems used in administering this nonmajor Federal financial assistance program, my 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. My study and evaluation was more limited than would be necessary to express an opinion on the internal control systems used in administering the Federal financial assistance programs of the Town. Accordingly, I do not express an opinion on the internal control systems used in administering the Federal financial assistance programs of the Town. Also, my audit, made in accordance with the standards mentioned above, would not necessarily disclose all material weaknesses in the internal control systems used solely in administering the aforementioned nonmajor Federal financial assistance program. E3� However, my study and evaluation and my audit disclosed the (,a following conditions that I believe result in more than a : relatively low risk that errors or irregularities in amounts that �.,; would be material to a Federal financial assistance program may `�' occur and not be detected within a timely period. �'3 1. condition: The Town is charging to grant funds on an ongoing basis cer- tain administrative costs that are allowable, but initially borne by other funds. Also, no standardized cost allocation plan exists for the charging of such expenditures. The Town also transfers monies between funds to cover temporary short falls in cash pending reimbursement by grantor agencies. This situation creates a great deal of activity between funds and programs that requires accountability. Recommendation: The Town needs to establish formal policies regarding the allocation of costs and the transfer of monies between funds including: 1. The establishment of a standard cost allocation plan. ' 2. The method for recording such transactions in the ac- counting system. �:� �, � � rj �� _ 13 0 � , Honorable Mayor and Town Council � Town of Marana Page 3 3. What documents are required to be maintained to support the transfers and expenditure charges, such as invoices and billings. Such policies will help insure the accuracy of accounting records and adherence to grant requirements. Response: Town management still intends to meet with the auditor for determining what formal policies are required to be imple- mented. 2. Condition: In fiscal 1988, the Town had a new major revenue source in development fees. The Town is dependent upon the Town's independent engineer to calculate development fees and to forward the monies to the Town. The Town does not determine if development fees are calculated correctly and whether the proper monies are being forwarded. Recommendation: Before a developer's plans are approved by the Town, the plans are reviewed by the independent engineer, an indepen- dent consultant and the Town's development services em- ployee. The independent consultant or the Town's development services employee should maintain a listing of all plans approved for comparison to fee receipts and recalculate development fees on a test basis. Such procedures will help insure the Town is receiving the proper development fees. Response: Town management will meet with the auditor for determining what formal procedures are required to be implemented in order to make sure strong internal controls exist over all cash receipts, including those related to Federal financial assistance programs. 3. Condition: In lieu of development fees in one circumstance, the Town accepted equipment as payment. The equipment was not recorded in the general fixed assets group of accounts nor was the revenue recorded in the general fund. 14 Honorable Mayor and Town Council Town of Marana Recommendation: Page 4 When payments of this nature are received, they should be immediately recorded in the general ledger accounts af- fected. By following this procedure, the activity reported in funds and account groups will be reflective of what has occurred. Response: The Town has recently addressed this situation with the passage of a resolution that requires the Town Council's approval of these types of noncash transactions. The resolu- tion process will facilitate the recording of such transac- tions, including any transactions that could possibly affect Federal programs. 4. Condition: The Town has not recently conducted a reconciliation of its physical property records and the items reflected in its general fixed assets group of accounts. Recommendation: I once again suggest that a physical inventory of property be conducted in the near future, for example at June 30, 1989, 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. 5. Condition: During the current.audit, it was discovered that revenue activity in the general ledger was sometimes distributed to related expenditure accounts, for example, reimbursements for independent engineering costs, Town attorney's fees, and other costs. Recommendation: To promote the usefulness of the general ledge� and insure adherence to legal requirements regarding expenditures, I once again suggest that expenditures only be distributed to appropriate expense accounts. This may result in the need to expand the number of general ledger accounts now being used. 15 ,� � Honorable Mayor and Town Council Town of Marana Response: Page 5 Management has made note of this problem in conjunction with the revision of Marana's accounting system that is currently in progress, but has not been implemented. 6. 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 budgeted activity. Also, because of expenditure limitation concerns, the Town approved a budget for fiscal 1988 that was somewhat unrealistic and did not balance within funds, but rather in total. 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. Management also needs to prepare bud- gets that are reflective of expected activity. The benefit is an improved means by which management can make decisions and insure adherence to budgetary requirements. Response: Management still 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. 7. Condition: Marana's current accounting system is still 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 maintained on a cash basis, except for year end when accruals are posted. However, such accrual activity is not always being captured, histor- ically in the area of grant revenues/receivables and expenditures/payables. 16 ,� Honorable Mayor and Town Council � Town of Mar�na Recommendation: Page 6 The Town still needs to implement an accounting system that is more conducive to preparing financial information in accordance with generally accepted accounting principles. The benefits will be in the area of improved financial information. Response: Management will have these problems addressed when the pro- posed new accounting system is fully operational. These conditions were considered in determining the nature, timing, and extent of the audit tests to be applied in (1) my audit of the 1988 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 22, 1988. 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. � l.�!��X,fi(il `'► /� � December 22, 1988 ,� � � � 17 � � , � �- Honorable Mayor and Town Council Town of Marana Marana, Arizona I have audited the general purpose financial statements of the Town of Marana, Arizona, for the year ended June 30, 1988, and have issued my report thereon dated December 22, 1988. My audit 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 audit referred to above, S selected and tested transactions arid records from the nonmajor Federal financial assistance program to determine the To�an's compliance with laws and regulations noncompliance with which I believe could have a material effect on the allowability of program expenditures. My testing of transactions and records selected from the nonmajor Federal financial assistance program disclosed the following situation: In fiscal 1988, as well as in the past, 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 follows: l. Drafting and awardirig contracts under the auspices of the grantor agencies, if required, that contain nondiscrimina- tion/wage standards clauses. 2. Forwarding to grantors for contract reimbursement support such as draw requests, invoices and engineer reports, if requested. 18 Honorable Mayor and Town Council Town of Marana Page 2 3. Requiring monitoring of all contractors by the Town's inde- pendent engineer for: a. Contract compliance. b. Completion percentages. c. Other areas, for example adherence to Arizona Depart- ment of Transportation specifications. A grantor agency, from a practical point of view, can expect not much more from the Town. Grantors 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 agen- cies are satisfied with Town procedures. Consequently, it appears that the Town is in compliance with the expectations of its grantor agencies. Taking into consideration that the aforementioned situation does not represent noncompliance, the results of my tests indicate that for the transactions and records tested the.Town complied with the laws and regulatians referred to above. My testing was more limited than would be necessary to express an opinion on whether the Town administered its nonmalor program in compliance in all material respects with laws and regulations noncompliance with which I believe could have a material effect on the allow- ability of program expenditures. However, with respect to the transactions that were not tested by me, nothing came to my attention to indicate that the Town had violated laws and regula- tions. /,,�,� C�G��'�GtG..� C� � �" ' ` ` / December 22, 1988 19 '� � , � . �-� � � Honorable Mayor Town of Marana Marana, Arizona and Town Counci.l I have audited the general purpose financial statements of the Town of Marana, Arizona, for the year ended June 30, 1988, and have issued my report thereon dated December 22, 1988. My audit of such general purpose financial statements was made in accord- ance 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 and, accordingly, included such tests of the accounting records and such other auditing procedures as I considered neces- sary in the circumstances. My audit 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 procedu�es applied in the audit 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�- C�GU.""� � c�1 /� / December 22, 1988 20 ;� � TOWN OF MARANA, ARIZONA SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE YEAR ENDED JUNE 30, 1988 Other Federal Assistance (a�, U.S. Department of HUD, passed through Pima County, contract Nos. 01-39-M-106343-1085,01-39- M and 13-39-M- 10 9131 - 0987,original fixed award amounts of $508,174. Balance Operating Balance July 1, Transfers and June 30, 1987 Revenues Expenditures 1988 � -0- $204,945 $204,945 $ _0_ Total Federal assistance $ -0- $204,945 $204,945(b) $ -0- (a) CFDA numbers could not be located for this program. (b) Includes $15,775 in operating transfers to the general fund to cover administrative costs borne b� this fund, but allocable to the program. 21