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Home My WebLink About1989 Financial Statement June 30,� `a: '" � � .. �. ��L TOWN OF MARANA MARANA, ARIZONA , FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1989 ' ` �� U �� .�� TOWN OF MARANA, ARIZONA JUNE 30. 1989 EXHIBIT 1 E ' TABLE OF CONTENTS PAGE Independent Auditor's Report 1 General Purpose Financial Statements: Combined Balance Sheet, All Fund Types and Account Groups 2 Combined Statement of Revenues, Expen- ditures and Changes in Fund Balances, All Governmental Fund Types 3 3 Combined Statement of Revenues, Expen- ditures and Changes in Fund Balances, Budget and Actual, General and Spe- cial Revenue Fund Types 4 4 Combined Statement of Changes in Financial Position - All Proprietary Fund Types 5 Sum�►ary of Significant Accounting Policies ` 6-9 Not�s to Combined Financial Statements 10-13 Report on Internal Accounting Control 14-18 Report on Compliance with Laws and Regu- lations � 19-20 Supplemental Sch�dule of Findings and Questioned Costs 21 Report on Supplemental Schedule of Fed- eral Financial Assistance 22 Supplemental Schedule of Federal Finan- cial Assistance 23 • . �r - • . a . Clifton, � Gunderson & Co. Certified Public Accountanis & Consuitants Honorable Mayor,and Town of Marana ' Marana, Arizona Town Council INDEPENDENT AUDITOR�S REPORT We have audited'the accompanying general purpase financial state- ments of the T4wn of Marana, Arizona, as of and for the year ended June 30, 1989. These qeneral purpose financial statements are the responsibility of the Town's management. Our responsibil- ity is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion,,the general purgose financial statements referred to above present fairly, in all material respects, the financial position of the Town af Marana, Arizona, at June 30, 1989, and the results of'its operations and changes in financial position of its proprietary fund types for the year then ended in conformity with'generally accepted accounting principles. The proprietary fund types, both the water and sewer funds, are in the development stage, which started July 1, 1988. Far fiseal 1989, only organizational costs for these funds were incurred. Tucson, Arizona February 27, 2990 � ' �, �� t t°o . 1 ARIZONA COLORADO ILLINOIS INDIANA IOWA MARYLAND MISSOURI NEW MEXICO OHIO WISCONSIN MEMBERS OF NR INTERNATIONAL A Worldwide Association of Independent AccounTing Firms MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS a0 u � P � � N f� �. N� M � . p P M� , N /` N Hl r+ w ~� p. P CD N O N� M � � P Y�i M O! e P I�A �. � � a w � �+ ' M J � N C � � E � � ` E'� O ~ N H � � M ' `�, �' � � W W t t � � � � H �LL W N ,W�,'J � � ° a°' ` w c� °° � y � V � W y � E-1 �-I y `��► � ~ � � U O � � � � ��, � o�z W z � � H'� h m� N� r�n � � �p Q W . r N�� M �!�. H�a � ►- � 9 � W . � (1 a��^ {�ff. . O u. L �O � OO O� � z � 1 � e�« � � � a a � M N P « N N � � N N h 1� M M w w P � N N N N N M � w � � a N .� � ' .� � � � N � w � � ��a�� V � x c ' o o d +�+ Z7 8 � W N dl t. a M + N 10 N� � � •� � � •� � < c� < � o o �+. f�. V1 N � N O� � � N M N .! O N � P � � f��. p. .- � v w � M M w O O�p O � � N � � M � � W J N � P N � M N N o y � � N N � � � � � N � W �+ 7 L u ( � W W N W N � � a� � � -� .�� W d d � .� L � O � � F�+ � N 0�! 1- � � � O t M Y L ¢ � � m w u � �ar $ J J t C O J W � � � O H � � ��p � M �O IA t� � CO � w M 1fi 0� � N a Q, N N e M- O � w M J N P w N N N � � � w w � M w N O� N «► � � M N N O « N N � � � N N � IN N � N y W � � H w d � W t -+ �� ~ C N L ^ � d d d � c � � N .� � w � � r ^ •� � �� W l0 O O � r � � u ,,, m / •+ d y t N � r •� 3 � � �- , M � � N � � �� C � � 10 c y N O d � • o o , � G � �� L O ,� u u N � �� G N � M � W �' C N � /0 y 'u r' C � C �' � w� � � N L H C I� � � �� 4 �I� �Mi � ♦ �1 �� ti �:... TOWN OF MARANA, ARIZONA COMBTNED STATEMENT OF REVENU�S, EXPENDITURES AND CHANGES ' iN FUND BALANCES ALL GOVERNMENTAL FUND TYPES - EXHIBIT 2 �,�AR ENDEQ JUNE 30. 19$9 Reverwes iaxes ' Sales - ToWn ' Sates - State Urban sharing Auto lieu ' licenses, fees, and pettiaits Fines, forfeitures, and ' penatties ' Grents and contributions ' Nighway user fees - State City of Tucson Block grants - County Arizona Department of Transportation ' ITAF ftmds - State ', U.S. Department of ' Transportation ' Sale of fixed assets ' Other Total revenues ' Exaenditures (Note 3) Administration ' Development services ', Town Attorney Public safety ' Magistrate court Pubtic works Transpo�tation Capital projects ' total expenditures ' Excess (deficiency) of revenues over (underl expenditures' Operating tratisfers ' fund balar�ces, beginninq � Fund batances, endin9 Totats Speciat (Memorandum Onlv) G e Revenue 1989 1988 S 254,182 S 254,182 f 233,350 103,119 103,119 44,214 98,407 98,40T 40,166 32,931 32,931 30,903 321,932 321,932 276,848 63,773 63,773 31,805 S 134,893 134,893 129,491 28,268 28,268 27,141 27,141 204,945 23,981 23,981 19,739 19,739 19,536 2,857 2,857 20,337 20,337 24.356 24,35b 14.173 919 0 7 236,879 1.155.916 1.125.931 162,717 11,802 174,5t9 276,258 126,104 126,104 62,690 62,690 58,147 676,021 31,125 507,146 350,071 40,253 40,253 31,494 226,145 226,145 160,554 23,981 42,860 66,841 19,927 14.561 14.561 189,170 891•76b 326.493 1.218.259 1.085.651 27,271 ( 89,614) ( 62�343) 40,280 ( 100,210) 100,210 -0- -0- 75.771 11.525 87.296 47,016 ; 2 83 S 2�2 1�21 5�24,�953 S 87.296 These financlal statements should be read only in connection with the accompanying sumnary of significant acco�mting policies and notes to financial statements. 3 . �� ' �t ��. ' TOWN OF MARANA, ARIZONA COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL AND SPECIAL REVENUE FUND TYP�S - EXHIBIT 3 YEAR ENDED JUNE 30. 1989 Generel Soeciat Revenue Actual B4dset (a) Variance Actual Bud�et (a) Variance Grants and contributions ' Highway user fees - State City of Tucson Btxk grants - County ' Arizona Oepartment of ' Transportation LTAF f�mds - State U.S. Department of Transportation , Sale of fixed assets , 20,337 -0- 20,337 Other ' 24.356 26$.661 ( 244.305) 919.037 1.531.492 ( 612.455) Revenues Taxes Sales - Town S 254,182 f 292,541 (S 38,359) Sales - State 103,119 161,065 ( 57,946) Urban sharing 98,407 159,357 ( b0,950) Auto lieu ' 32,931 49,861 ( 16,930> Licenses, fees, and permits 321,932 532,843 ( 210,911) fines, forfeitures, and ' penalties 63,773 6T,164 ( 3,391) Totel reverx�es Exneridi tures Administration Development services Town Attorney P�lic safety Magistrate court P�tic works Transportation Capitat projects 162,717 416,453 253,736 126,104 164,367 43,263 G2,690 -0- ( 62,690) 476,021 758,306 282,285 40,253 108,630 68,377 23,981 -0- ( 23,981) S 134,893 S 219�424 (S 84,531) 28,268 -0- 28,268 27,141 t85,000 ( 157,859) 23,981 -0- 23,981 19,T39 31,943 ( 12,254> 2,857 -0- 2,857 -0- 750.000 ( 750.000) 236,,879 1.186.417 ( 449,538> 11,802 -0- ( 11,802) 31,125 493,724 462,599 226,145 424,436 198,291 42,860 31,993 ( 90,867> 14,561 185,000 170,439 Other -0- 78.736 78.736 -0- 51.264 51,264 Total expenditures ', 891.766 1.531.492 639.726 326.493 1.186.417 859.924 Excess (deficiency) of re- ven�s over (under) ' expenditures 27,271 -0- 27,271 ( 89,614> -0- ( 89,614) Operating transfers t 100,210) -0- C 100,210) 100,210 -0- 100,210 Ptu�d bala�ues, bes�irmin9 75.771 -0- 75.771 11.525 -0- 11.525 Fund batances, enciing S 2�,�2 �� 3�? 832 f 2�2 12�1 � E�21 (a) The Town's budget inctuded an additionat f 82,091 for water and sewer enterprise activities that are in the development stage and had not generated any reverx� or ir�curred erry expenses for the year ended June 30, 1989. 7hese financiat statements should be read only in comection with the accompanying sum�ary of significant accounting polieies and notes to tinancial statements. 4 � ' �1.1��?� �� ', TOWN'OF MARANA, ARIZONA COMBINED STATEMENT OF CHANGES IN FINANCIAL POSITION ALI, PROPRIETARY FUND TYPES - EXHIBIT 4 �EAR ENDED JUNE 30, 1989 Source of workin� capital Interfund loans Proprietary Totals Fund Types (Memorandum Only) Water Sewer 1989 $ I3,050 $ 13,050 Application of workinq capital ' Increase in organiza- tional co�ts Total use'of funds Decrease in worl�,ina capital Tncrease in'accounts payable ( 20,929) ($ 33.721) ( 54.650) ($ 7,879) ( 33 ' 1) ($ 41.600) ($ 7.879) ( 3 721) ($ 41,600) These financial statements should be read only in connection with the accompanying summary of significant accounting policies and notes to financial statements. 5 a t�u �' ��c�. TOWN OF MARANA, ARIZONA SL�MMARY OF SIGNIFICANT ACCOUNTING POLICIES YEAR ENDED JUNE 30, 1989 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 govern- ment. Ali fund� and entities related to the Town that are con- trolled by the mayor and council are included in this annual financial report. This control is determined on the basis of budget adoption, taxing authority, and the ability to issue out- standing debt secured by revenues or which is a general obliga- tion of the Town. The Town provides a full range of services including general governmental administration, legal services, public safety, public works and transportation. The aceounting policies of the Town conform to generally accepted accounting principles as applicable to governments. The following is a sum- mary of the more significant policies: A. �'und accountina The accounts oE 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 resources are allocated to and ac- counted for in individual funds based upon the purposes for which they are to be spent and the rneans by which spending activities'are controlled. The various funds are grouped, in the financial statements in this report, into generic fund types and broad fund categories as follaws: 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 specifia revenue sources that are legally restricted to expenditures for specified purposes. Debt serviee fund - Although such a fund is normally used to account for the accumulation of resources for the payment of general long-term debt principal, interest and related costs, the Town has not established such a fund, since the long-term ,debt is primarily the result of iease-purehase agreements'that are funded directly from governmental funds with no amounts accumulated. This information is an integral part of the aecompanying financial statements. ! 6 • �r � � : ♦ . ' TOWN OF MARANA, ARIZONA SUMMARY O� SiGNIFICANT ACCOUNTING POLICIES (CONTINUED) ' �EAR ENDED JUNE 30, 1989 A. Fund accou;ntinq (continued, Proprietary funds: Enterprise funds - These funds are used to account for water and sewer'operations that are financed and operated in a manner similar to private business enterprises. The intent of the governing body is that the costs (expenses, including depreciationj of providing water and sewer services to the general public on a continuing basis be financed or re- covered primarily through user charges. The water and sewer funds, which are separate corporate entities under Town auspices, are both new in fiscal 1989 and are in the development stage. During fiscal 1989, the only activity in either of'these funds wa� the incurrence of organizational costs. B. �teasurement focus, fixed assets and long-term liabilities The accounting and reporting treatment applied to the fixed assets and' long-term iiabilities associated with a fund are determined'by its measurement focus. All governmental funds are aecounted for on a spending or "financial flow" measure- ment focus. This means that only current assets and current liabilities are generally included on their balance sheets. Their reported fund balance (net current assets) is con- sidered a measure of "available spendable resources." Governmental fund operating statements present increases (revenues and other financial sources) and decreases (expen- ditures 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 (gen- eral fixed assets) are accounted for in the general fixed assets group o€ accounts, rather than in governmental funds. Public damain ("infrastructure") general fixed assets con- sisting o'f certain improvements other than buiidings, inaluding 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 an the date donated. Long-term liabilities expected to be financed from govern- mental funds are accounted for in the general long-term debt group of accounts, not in the governmental funds. This information is an integral part of the 'accompanying financial statements. 7 � � � �c � . �s�� # �. �;_ TOWN OF MARANA, ARIZONA SUMMARY O�' SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) YEAR ENDED JUNE 30, 1989 B. Measurement focus fixec� assets and long term liabilities (continuedl Because of their spending measurement focus, expenditure recognition of governmental fund types is limited to exclude amounts represented by'noncurrent liabilities. 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 gen�eral long-term debt group of accounts. The aforementioned two account groups are not funds. They are concerned only with the measurement of financial posi- tion. They are not involved with measurement of results of operations'. All proprietary funds are accounted for in a cost of services 4r "capital maintenance" measurement focus. This means that all assets and all liabilities, whether current or noncurrent, associated with their activity are ineiuded on their balance sheets. Their reported fund equity, net total assets, is segregated into contributed capital and retained earnings components. Froprietary fund operating statements' present increases (revenues) and deereases (expenses}'in net total assets. 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 expendi- tures 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 measure- ment focus applied. The proprietary funds are maintained on an acerual basis of accounting. The governmental funds are maintained on a madified accrual basis. The modified accrual basis of accounting'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. This information is an integral part of the 'accompanying financial statements. 8 • . i- • ; • ' TOWN' OF MARANA, ARIZONA SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUEDj YEAR ENDED JUNE 30, 1989 D. Budgets an� budgetary accountinq The budgets formally adopted by the mayor and council are prepared or� a purpose, not object basis. Al1 appropriations lapse at year end, and the budgetary information reflected on the financiai statements represents the original adopted budget for fiscal 1989 with no augmentations. E. Encumbranc�s Encumbrance accounting, under which purchase orders, con- tracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applic- able appropriation, is not employed as an extension of formal budqetary 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 1989. G. Gompensatec� absences In the gen�ral long-term debt group of accounts, essentially the entire',accumulated liability for eompensated absences is reflected, since the liability at June 30, 1989, will most likely not be paid within the current accounting cycle. Rather, in fiscal 1990 the Town will probably pay that year's accrual without utilizing amounts accrued from prior years. H. Comparativ� 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 operations. I. �otal columns on the combined �inancial stat Total columns on the combined financial statements are cap- tioned "Memorandum Only" to indieate 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. Inter- fund eliminations have not been made in the aggregation of this data.' This,information is an integral part of the accompanying financial statements. 9 �u��i�n �o TOWN OF MARANa, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30. 1989 � Note 1- Changes in qeneral fixed assets The following is a summary of the changes in general , fixed assets for fiscal 1989: Land Land improvements Assets urxier capitat iease Machinery, equipaent and other assets Batance Balance Julv 1. 1988 Additions Deletions June 30, 1989 S 7,134 S 7,134 123,412 123,412 3G0,303 f 11,021 (f 8t,971> 289,353 225.520 96.867 ( 45.054> 277.333 f 71�3b9 t�° � (f 1 7 02 ) S 69�7 23? Note 2- Change;s in general long-term debt The following is a summary of general-long term debt transactions for fiscal 1989: Balances-July 7, 1988 Capital leases entered Retirements Capitat land leases ta) Contracttb) S 218,672 f 3,75� 11,021 < 84.602) ( 253) Total 5222,430 11,021 t 84.855) Balances-June 30, 1989 t 145.091 S 3.505 148,596 Long-term portion of accrued vacation and compensacory time, with a net increase of 518,812 over fiscal 1988 44.647 Total generat tong-term debt et June 30, 1989 579� (a) The following is a schedule by years of the future minimum lease payments under eapital leases to- gether with the present value of the net minimum lease payments as of June 30, 1989: : Years ending �une 30: 1990 ' 1991 I992 1993 Total net minimum lease payments Less amount representing interest Present value of net minimum lease _ 'payments $ 64,439 49,910 33,286 17.2Q7 164,842 ( 19.751) 145 091 This'information is an integral part af the accompanying financial statements. 10 ix�d��n� �. TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 3Q. 1989 Note 2- G anges in qeneral 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 installments of approximately $575. Note 3 - Additional disclosures The Town does not budget on an object basis; therefore, the expenditures on the general purpose financiai state- ments have been grouped by purpose, which is the Town's budgetary approach. Although this facilitates budget to actuail comparisons, the following analysis is necessary to analyze expenditures by current, capital and debt service (capital lease payments) categories: Current Capital Debt _ ' Purpose O�erations Outlay Service Administration Development services � Town Attorney Public safety Magistrate court Public works Transportation Capital outlay/projects � $ 172,055 $ 126,I04 62,690 429,663 40,253 190,002 47,962 14.561 $1,068.729 47 641 141 889 871 $ 1,593 21,955 55,528 10,254 25,8$9 18,879 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 1989 by fund, considering the Town's contingency appropriations. This information is an integral part o€ the accompanying financial statements. 11 � :, � - � w •. TOWN OF MARANA, ARIZONA NOTE3 TO COMBINED FINAPTCIAL STATEMENTS (CONTINUEDj ' YEAR ENDED JUNE 3Q, 1989 Note 4 - Pensi�on plan Upon employment the public safety personnel partieipate in the Arizona Public Safety Personnel Retirement Sys- tem, which is a multiple-employer plan. The Town's covered payroll for public safety personnel totaled approximately $246,000 for fiscal 1989, whereas total payroll for all employees aggregated approximately $449,'000. Contributions by the Town to the System are subject to aetuarial valuations and the Town's position in the System at June 30, 1988, the most recent actuar- ial valuation date available, reflects an unfunded actuarial accrued liability of $18,985, taking into consideration $75,614 of accrued assets, $187,439 of prospective assets and $282,038 of prospective payments. Contributions for fiscal 1989 by the Town approximated $12,300. Note 5- Commitments and contingencies The Town is subject to having audits performed on cer- tain,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 liabilities exist at June 30, 1989. The Town is continuously liable in respect to other claims incidental to the ordinary course of its opera- tions. At June 30, 1989, it is the opinion of Town man- agement, based on the advice of the Town attorney, that any such claims would not have a material effect on the Town's financial position. Note 6 - Subs�quent events The Town has entered into an agreement with a developer to build and lease-back to the Town a new administration facility at $20,000 a year through June 30, I992, then $35,Q00 a year through June 30, 2017. The Town will have an option to purchase the complex through June 30, 1992, far the maximum sum of $250,000, with annual reductions of $10,000 a year in the purchase price through the re- mainder of the lease term. Rent for the year ended June 30, 1990, will be prorated based upon the date of occu- pancy. The aption price is based upon the anticipated costs of construction, and it may vary downward if there are cost savings. The developer can void the agreement if the complex will cost greater than $250,000, and the Town must accept the complex for the agreement to be operational. It appears that construction will start as early as April 1990. This information is an integral part of the accompanying financial statements. 12 � ID ��.1 � ! 37� f�. TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) Y�AR ENDED JUNE 30. 1989 Note 6 - Subs�c;uent events �continued) The Town has created two municipal eorporations for pur- poses of operating the water and sewer enterprises. The Town is in the process of arranging for a corporate bond issue in the amount of $280,000 to purchase a water company. This issue will probably be finalized in Apri1 1990, with the Town's general fund tax revenues pledged to r�tire the bonds, as well as the water revenues. An upcoming corporate sewer bond issue has been discussed, but �s still in the formative stages. The Town, due to its growth, has experienced cash flaw shortages subsequent to year end. Its major creditors have,been working with the Town, and the Town has em- barked on a program to identify new tax revenue in order to keep from curtailing some of its public services. This information is an integral part of the accompanying financial statements. 13 s • � a : �► ,. Clifton, Gunderson&Co. Certified Public Accountanis & Consultanis Honorable Mayor and Town Council Town of Marana Marana, Arizona We have audited the general purpose financial statements of the Town of Marana, Arizona, for the year ended June 30, 1989, and have issued our report thereon dated February 27, 1990, As part of our audit, we made a study and evaluation of the internal control systems, including applicable internal administrative controls, used in administering federal financial assistance programs to the extent we considered necessary to evaluate the systems as required by generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, the Single Audit Act of 1984, and the pro- visions of aMB Circular A-128, "Audits of State and Local Governments". For the gurposes of this report, we have classified the significant internal accounting and administrative controls used in administering federal financial assistance programs in the following categories: Accounting controls: Cash receiptsJrevenue Cash disbursements/purchases Payroll General ledger Governmental finaneial assistance programs: Types of services provided Eligibility Reporting The management of the Town is responsible for estabiishing and maintaining internal cantrol systems used in administering federal financial assistance programs. In fulfilling this respon- sibility, estimates and judgments by management are required to assess the expected benefits and related costs of control pro- cedures. The'objectives of internal control systems used in administering,federal financial assistance programs are to pra- vide management with reasonable, but not absoiute, assurance that, with respect to federal financial assistance programs, resouree use is consistent with laws, regulations and policies; resources are safeguarded against waste, ioss and misuse; and reliable data are obtained, maintained and fairly disclosed in reports. � MEMBERS OF NR INTERNATIONAL A Worldwide Association of Independent 14 AccounTing Firms MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED ARIZONA COLORADO ILLINOIS - INDIANA IOWA MARYLAND MISSOURI NEW MEXICO OHIO WISCONSW PUBLIC ACCOUNTANTS Honorable Mayor and Town'Council Town of Marana Page 2 Because of inherent limitations in any systems af int counting and administrative controls used in admin sterin federal financial assistance may nevertheless occur and not be detectedr�rs or irregularities any evaluation of the systems to future Also, projection of risk that procedures may become inade Periods is subject to the conditions or that the degree of compliance with the quate because of changes in may deteriorate. procedures Our study included all of the applicable contr listed above. During t�e ol categories no major federal financial a s sta �� une 30, 1989, the Town had of its total federal financial assistance under the foll programs and expended 10�� nonmajor federal financial assistance programs: owing a. Community Development Block Grant. b• Metropolitan Area Narcotics Tactica3 Investigative Squads Grant. a• Highway Safety Grant. With respect to internal control systems used i these nonmajor federal financial assistanee n administering and evaluation'was limited to a Programs, our study to obtain an understanding of thell on �r v i r environment e sYstems flow of transactions through the accounting systems. Qu�nd the and evaluation did not extend beyond this r study stage. preliminary review Our study and evaluation was more limited than woul to express an opinion on the internal control systems use d be necessary admir�istering �he federal financial assistance pragrams of t� Town, Accordingly, we do not express an opinion on the intern control systems used in administering the federal al assistance programs of the Town. financial Also, our audit, made in accordance with the standards mentione in the first paragraph, would not necessarily disclose mate ' d weaknesses in the internal control systems, for which our stud and evaluation was limited to a tems, as discussed in the fifth preliminary review of the sysy paragraph of this report. However, our study and evaluation and our audit d' following conditions that we believe result in lsclosed the relatively low risk that errors or irregularities in amounts that would be material to a federal financial assistancemore than a occur and not be'detected within a timel Arogram may y period. 1• Prebiiling grant funds: The Town was reimbursed b gineerin costs. �y pima County for prebilled en- g The Town s contract specifies that it only be reimburs�d for eligible costs that have been incurred. It � � - # : s. # C: During tMe past two fiscal years, the Town has received sub- stantial, revenue from developers for consideration of annexation plans and specific development plans. The Town is dependent upon the Town's independent consultant to calcu- late the' development fees, and the developers to remit the cal.culated fees to the Town. The problem is that the Town does not know if it is being remitted the praper fees or whether ,they are being calculated correctly. Before a developer's plans are approved by the Town, the plans are reviewed by the independent consultant, an independent engineer and the Town's development services employee. We recommend the Town's development services employee maintain a listing of all plans approved for comparison to fee receipts' and the general ledger, as well as recalculate developm�nt fees on a test basis. Such procedures will help insure the Town is receiving the proper development fees and has accurate financial information. 16 Honorable Mayor and Town'Council Page 3 Town of Marana 1. Prebilling'grant funds (continued): 2 . should b� noted that the request for reimbursement was sub- mitted by a former employee, and the request was submitted just prior to the contract expiring. However, the Town did have the'option of requesting an extension on the contract and could have requested reimbursement when the engineering costs were incurred under the extended contract. We recom- mend the'Town establish procedures to monitor the terms and deadline� of its contracts, so that it can take full advan- tage of 'its financial opportunities under these contracts and r►ot �eopardize the propriety of its expenditures: Administrative and cammon costs charged to grant funds: The Town is charging administrative and other common costs to grant funds on an ongoing basis that are eligible, but no standardized cost allocation plan exists for the charging of such expenditures. The Town needs to establish forrnal poli- cies to ensure that these eligible costs are allowable and representative. We recommend that these policies include: 1. The establishment of a standard cost allocation plan. 2. What documents are required to be maintained to support the expenditure charges, such as invoices and billings. Such policies will help insure the accuracy of accounting records and adherence to grant requirements. 3. Development fees: � . � � +r . � . r� Honorable Mayor and Town'Council Town of Marana 4. Fixed asset inventory: Page 4 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. We recommend that a physical ir►ventory of property be conducted in the near future, for example at June 30, 1990, and that a reconcilia- tian of that inventory be made to the general ledger, with all appropriate adjustments being investigated and made. This pracedure should be performed periodically to help improve the accountability over fixed assets. 5. Budgets: C� I I 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 1989 that was somewhat unrealistic. We reeommend that management budget by object and augment this budget on a periodic basis, e�pecially for federal programs, so as to insure the ability to compare budgeted and actual data in a meaningful manner. Management also needs to prepare budgets that are reflective of expected activity. TY�e benefit is an improved means by which management can make decisions and insure adherenc� to budgetary requirements. 6. Accounting system: Marana's current accounting system is still in need of eval- uation for: A. It is not segregated by fund. B. It fs not updated throughout the year for account group transactions reiated 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 aecrual activity is not always being captured. We recommend the Town implement an accounting system that is more cor�ducive to preparing financial information in accordance with generally accepted accounting principles. The benefits will be in the area of improved financial informat�.on. These conditions were considered in determining the nature, timing, and extent of the audit tests to be applied in (i) our audit of the 1989 general purpose financial statements and (2) our audit and'review of the Town's compliance with laws and regu- lations noncompliance with which we believe could have a material 17 � �u e�n $� ��o �� li I• �� Honorable Mayor and Town"Council Page 5 Town of Marana effect on the allowability of program expenditures for federal 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 February 27, 1990. ' It should be noted that comments 2, 3, 4, 5 and 6 are repetitive comments from'fiscal 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. � �►,., �..,,..1 �O . � i• �• �• �� I• • i Tucson, Arizona February 27, 1990 �s ul ��` ' ilTf "" R i-. . i li �� Clifton, Gunder�on & Co. Certified Public Accountants & Consultants � ' Honorable Mayor Town of Marana Marana, Arizona IM I• I• and Town Council In connection with our audit of the 1989 financial statements of the Town of Marana, Arizona, and with our study and evaluation of the Town's internal control systems used to administer federal financial assistance programs, as required by O€fice of Management and Budget Circular A-128, "Audits of State and Local Governments", we selected certain transactions applicable to certain nonmajor federal. financial assistance programs for the year ended June 30, 1989. As required by OMB Circular A-128, we have performed auditing procedures to test eompliance with the requirements governing types of services ailowed or unallowed; eligibility; and the provisions contained within the Town's contracts for its nonmajor federal financiai assistance programs that are applicable to those transactions. Our procedures were substantially less in scope than an audit, the objective of which is the exgre�sion of an opinion on the Town's compliance with these requirements. Accordingly, we do not express such an . opinion. Our testing of transactions selected from the nonmajor federal financial ass3.stance programs disclosed the following situations: l. The Town'received advance funding for costs not yet incurred under its Community Development Block Grant program. According to the provisions of the Town's contract for this program, it was not to be reimbursed for costs until they were incurred. 2. The Town received reimbursements for administrative costs under its Community Development Block Grant program. Some of ,,� these costs did not have su€ficient supporting documentation to determine if they were eligible for reimbursement under this program. The above situations are further described in the accompanying schedule ot findings and questioned costs. • �i 19 ARIZONA COLORADO ILLINOIS INDIANA IOWA MARYLAND MISSOURI NEW MEXICO OHIO WISCONSIN MEMBERS OF NR INTERNATIONAL A Worldwide Association of Independent Accounting Firms MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS Honorable Mayor and Town"Council Town of Marana Page 2 With respect to other items tested, the results of those proce- dures disclosed no material instances of noncompliance with the requirements listed in the first paragraph. With respect to items not tested, nothing came to our attention that caused us to be- lieve that the Town of Marana had not complied, in all material respects, with those requirements. This report is intended for the information of management and grantor agencies. This restriction is not intended to limit the distribution of this report, which is a matter of publie record. , • �,,� d,.�,,,,,� ; � . Tucson, Arizona February 27, 1990 20 � � uo�ip�iq IE � ' # .�� •': �� I• �� I• �� I• �� I�� H � O U A W RC O oH HW � � a .q �z� � C9 x oz H �w HO W a 0 w x u � b � � N O +�' .,.� y +� O ul U ' N � O� � A -� � � .,� w M d' � O� r I� 1 01 • I � N dl 1 N G1 'L7 1 UI 1 �� I a� � � N v1 � u1 .� � � .� .0 Q1 � a� p+ � 3 .� � S-I �� S�1 +� •�-�1 Gl .1.� l� � N E tl1 •�-1 tlI �••1 O� O �� S��i� � U ,q �� G�! N � H b tA�O O �O� 'd#3��0'C � � td � W� t� UI � Q tA G} •�-i �� .� .N 3.� Of��+� � �� .Nrtt .N 3oa��cs�ds��o b .�a� � �� ° n�� w o�'�a�i� w a�� 'b •�+N�o xo•�,��a o .� O �•ri ia � �; N+� •�-1 R1 •�-1 � LT N E-r'Ct d� 3� O't3 • u1 f� 3 r� .N •.1 � tU � t� � f-� E� � Ul o N O Nl tT • �-t t/1� Q) O U1 �� W N t� � i� .4 �-I }� N N �--� � •n Ql 3r cl1 3 � � N � � +� �d � �-► W rt � C�-�A 0��+�E�-+A UE+A� 3H�-�� Q.�w U� O N' •� N � 't1 � ' cv U�a� o0 oroabo . x •� a� o ,� ,..- � � a1 ' � U �' d� H �' z s.� � � +� r-�1 O � H � � � N S�► ' a�i °� � '� �o H �,, °v ro a � •� � � o, cn .-� o • � o �' � O t!} .,.� � t� N ' r-1 � � �O w z ar w .� i r c� o� o� rtf O U o� N �� I �� c� C� • UI ' �'d � � l� �� 3�a � •oo O� f1�N Ox0 � oa� � N +� M �, tl�O��o ��xw+�� o o ?� t0 �3 .1.1 N Q . � t� +� O tI>UU N �•n� � � � .1� N � o� -� � 3 � � � �� b � � � 3 � �� O U � . �� +� U O � � N � �-�1 U �� ZS �ro�� a��oo �aH-� N Ul � N � O H � a� •.� • ��ON ��Q��,U � � N � � � N � � N � N .� N •� rtS � 0+�� •�U�� d � � 3 � ow •�oN o +� b �l.�iU • N +� rtf U1 � Nr1� •ri •ri tA �AGIO � •.�1 � U N � tU �bo� � s� w ,� o �s +� �?��N Rf •r-# UI � � � N �OOf-� •� •r1 -r1 'Cj N R,�rt3 � � HO�� N � 0 z � N 'C1 �"�': � � . . . • � Cliftori, Gunder�on & Co. Cerfified Public Accountants & Consultants �� Honorable Mayor and Town Council Town of Marana • Marana, Arizona We have audited the general purpose financial statements of the Town o€ Marana, Arizona, for the year ended June 30, 1989, and • have issued our report thereon dated February 27, 1990. These general purpase financial statements are the responsibility of the Town's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted'our audit in accordance with generally accepted � auditing standards and Government Auditing Standards, issued by the Comptroller General of the Unites States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of �naterial misstatement. la,n audit in accordance with these standards includes examining, on a test basis, evidence • supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. • Our audit was made for the purpose of forming an opinion on the general purpose finaneial statements of the Town of Marana, Arizona, taken as a whole. The accompanying schedule of federal financial assistance is presented for purposes of additional analysis and is not a required part of the general purpose finan- • cial statements. The information in that schedule has been sub- jected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated'in a11 material respects in relation to the general purpose financial statements taken as a whoie. I• • �,v J �o . Tucson, Arizona February 27, 1990 ZZ MEMBERS OF NR INTERNATIONAL A Worldwide Association of Independent Accounting Firms MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED ARIZONA COLORADO ILLINOIS ' INDIANA IOWA MARYLAND MISSOURI NEW MEXICO OHIO WISCONSIN PUBLIC ACCOUNTANTS [� TOWN OF MARANA, ARIZONA SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE � XEAR ENDED JUNE 30� 1989 • Balance Balance July 1, June 30, Other Federal Assistance (a) 1988 Revenues Expenditures 1989 U.S. Department of HUD, passed through Pima County, con- tract Nos. 13 • and 01 orig- inal fixed award amounts of $351,000. (b) ' $282,052 $27,141 $ 27,141 $254,911 U.S. Department of Transporta- tion, passed through the State • of Arizona Governor's Office of Highway Safety, agreement No. 89-315-008, original fixed award amount of $3,000. -0- 2,857 2,857 -0- U.S. Department of Justice, • passed through the Arizona Criminal Justice ' Commission and the City of Tucson, con- tract No. 0197-89, no fixed award amount. -0- 28.268 28.268 -0- • Total Federal Assistance 282 5 58 � 58 66 254 911 I• I• C� �• (a) CFDA numbers couid not be located for these programs. (b) Excludes $74,250 in deferred revenue and prepaid expenses. ' 23 � �' s: s€�.;>> ��