The URL can be used to link to this page

Home My WebLink About1990 Financial Statement June 30� � r� �� " .� • TOWN OF MARANA MARANA, ARIZONA • FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1990 � � • � � � � � � � EXHIBIT • 1 2 3 • 4 t 5 � :� �� TABLE OF CONTENTS Independent Auditor's Report General Purpose Financial Statements: Combined Balance Sheet, All Fund Types and Account Groups Combined Statement of Revenues, E�en- 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 Combined Statement of Revenues, Expenses and Changes in Deficit, Al1 Proprietary Fund Types Combined Statement of Cash Flows, All Proprietary Fund Types Summary of Significant Accounting Policies Notes to Combined Financial Statements PAGE 1 E 3 4 5 6 7-12 13-23 � i• �� Clifton, . Gunderson & Co. Certified Public Accountanis & Consultants Honorable Mayor and Town Council Town of Marana ' Marana, Arizona ' INDEPENDENT AUDITOR'S REPORT I• I• We have audited the accompanying general purpose financial statements of the Town of Marana, Arizona, as of and for the year ended June 30, 1990. These general purpose 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 aud'it. We conducted our audit in accordance with generally accepted audit- ing standards, Government Auditing Standards, is5ued by the Gomp- troller General of the United States, and the provisions of Office of Management and Budget Circular A-128, "Audits of State and Local Governments." Those standards require that we pian and perforin the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstate�ent. An audit includes examining, on a test basis, evidence supporting th� amounts and disclosures in the general purpose financial state- ments. An audit also includes assessing the accounting principles used and significant estimates made by management, as we11 as evaluating the overall financial statement presentation. We be3ieve that our audit provides a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all materiai respects, tl�e finaneial position of the Town of Marana, Arizona, at June 30, 1990, and the resuits of its operations and cash flows of its proprietary fund types for the year then ended in conformity with generally accepted accounting principles. � f � ►�a�v� ��u ox1 � . �� Tucson, Arizana February 18, 1.991 1 MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED ARIZONA COLORADO ILLINOIS INDIANA IOWA MARYLAND MISSOURI NEW MEXICO OHIO WISCONSIN PUBLIC ACCOUNTANTS � P C ' N O N � . � O G P v�i M'. O� .M- p ^ . p � E i0 7 p IA ~ � pO � � M O a M S� P M 0 D � � O� � O M� � �� M N P �O . !N W , � � :) � 1 � H H � H � W � H W � W x �� W • � � � � U O A '� z oz�h H � 1 � y 1G1 0 � H U � H Q � �1 a a � W C a+ J C1 C ca E � � C t�- L � cv ++ � y � O -+ y a � a c - p t�7 X LL � l0 a T N J I� L N N 1- C�0 � � . � � � � L �L Y a = ►� � W� �� pl�N � MNY C N K N H � � � 0�00 �M W N �a � � 1 � � � W � � � W M N N N N a a �O �O w u► �O v � �T M N MOOM �O P �n �n �t M � O O N N N O�t��-P CO � M � �� o � � � M �O O� N s S � � M M N f� O 1� �T O 3 � � � w N N �t O 00 � 1� M P O � � N M � N N I�A 1R!'1 � � � � � M � N O. � �1 O� N N N O �O f� M �Nti 00 r t� t0 �O in � �� d � H v v N M N ti � � � 1 � N M � � S � � M � � � 0 M 0 M � I� 1� P �f1 IA O N � � M � ��i N N N � � � v v �O v � M M N N o�. a �O �O W � pJ M W �� y -p r � N N X ��p � � M /0 � � l0 . � � � � � v � L • C !O � C .� ^ U ..- V N � •�- ql W L N N t0 � M W W �T � C C� � C a� N r z 'p C > J � o � � � � �� m .� �0 v pl � L� CI v Y - � p N C N v � �Cl � �� •� � ' � p .� C d � C O ol C�p � v�- � a+ W C� � C � � l0 C� LL +_+ pl E��a � tll Vl �{p W N'�O J �/1 � l0 •� X O Y O i+ N(0 N CJ O. L L ++ N �+ V �p W N C a+ N d� •�- l0 • • N E W C C N SO W pl U E y N pl U a+ ++ a+ W O �p t� M N pl y Y� a+ a+ a+ C! � 6 E tA > N 01 O •� •� a+ Ql N O E N a+ E� O O � � ` '� "`- d � C �i °' ~ � a � " `w ci ,- „€ z � w d ~ '- v�muo��c�w.�� . . u�d�d S �dcc u� u� u a� v m> +� x m w u v- w> � ac�a�ac.. az� � �<cc� c� �c••� � � � N M � � N r0 O � � a O h s N �O W C ,� N �� u �, m W �+ W N L � {'' W �� •3 C �� ;, o �� N d a+ V C � � � � N O � ^ N �� L � �� O � t o N V U N � � Y C � � U �+ w a ••- W � W �y �V � C � C � � �� N y L H � TOWN OF MARANA, ARIZONA COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES - EXHIBIT 2 ! YEAR ENDED JUNE 30. 1990 � Totals Special (Memorandun OnIY) General Revenue 1990 1989 Revenues Taxes Sales - Marana S 312,872 S 372,872 E 254,182 � Sates - Arizona 107,567 107,567 103,119 Urban sharing 102,356 702,356 98,407 Auto lieu 31,800 31,800 32,931 Licenses, fees, and permits 724,919 124,919 321,932 Fines, forfeitures, and penalties 88,635 88,635 63,773 GraMS and contributions Highway user fees - Arizona E 139,872 139,872 134,893 � Public safety - Tucsan 28,673 28,673 28,268 Block grants - Pima County 158,742 158,742 27,747 Arizona Department of Public Safety 30,000 30,000 LTAF funds - Arizona 21,228 27,228 19,739 Public safety- Pima County 38,206 38,206 Sale of fixed assets 20,337 � Other 30.366 6,019 36.385 51,194 Total revenues 798,515 422,740 7,227,255 1,155,916 Expenditures CNote 5) Administration 189,732 2,052 191,784 174,519 Development and planning services 82,687 82,687 12b,104 • Town Attorney 81,266 81,266 62,690 Public safety 448,764 %,879 545,643 507,146 Magistrate court 62,751 62,751 40,253 Public uorks 220,223 220,223 226,145 Transportation 10,324 13,5b1 23,885 66,841 Capital projects 106,690 106,690 14.561 Total expenditures 875,524 439.405 1,314,929 1,218,259 ; Deficiency ot revenues under expenditures ( 77,009> ( 16,665) ( 93,674) ( 62,343) Operating transfers ( 46,274) 46,274 -0- -0- Fund balances, beginning 2,832 22,121 24.953 87.296 Fund balances, endina_ (S 120.451) S 51,730 (S 68.721> S 24,953 � � These financial statements should be read only in connection with the accompanying sumnary of significant accounting policies and notes to financial statements. 3 ; � � � � � ; � 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, 1990 General Actual Budget (a) Variance Revenues Taxes Sales - Marana S 312,872 E 606,596 (S 293,724) Sales - Arizona 107,567 121,187 ( 13,620) Urban sharing 102,356 121,186 ( 18,830) Auto lieu 31,800 50,000 ( 18,200) Licenses, fees, and permits 124,419 437,868 ( 312,949) Fines, forfeitures, and penatties 88,635 100,000 ( 11,365) Grants and contributions Highway user fees - Arizona Public safety - Tucson Block grants - Pima County Arizona Department of Public Safety LTAF furids - Arizona Public safety - Pima County Other 30.366 1.000 29.366 7otal revenues 798,515 1.437,837 ( 639,322) Expenditures Administration 189,732 185,998 ( 3,734) Developnent and planning services 82,687 83,700 7,073 Town Attorney 81,266 85,538 4,272 Public safety 448,764 590,350 141,586 Magistrate court 62,751 64,28T 1,536 Public works -0- 269,052 269,052 Transportation 10,324 -0- ( 10,324) Capital projects Other -0- 170,912 770.912 Total expenditures 875.524 1,449,837 574.313 Def i c i ency of revern�es under expenditures ( 77,099)( 12,000> ( 65,009) ( Operating transfers ( 46,274) -0- ( 46,274) Fund balances, begirming 2.832 12.000 ( 9,168) Fund balances. endina ($ 120,451) S -0- (S 120,451) Saecial Revenue Actual Bud9et (a) Variance S 139,872 S 756,188 (S 16,376) 28,673 -0- 28,673 158,742 185,000 t 26,258) 30,000 -0- 30,000 21,228 25,000 ( 3,772) 38,206 -0- 38,206 6,019 600.000 ( 593.981) 422,740 966,188 ( 543,448) 2,052 -0- ( 2,052) 96,879 250,000 153,121 220,223 156,188 ( 64,035) 13,561 25,000 11,439 106,690 185,000 78,310 -0- 350,000 350,000 439.405 966.188 526,783 16,665) -0- ( 76,665> 46,274 -0- 46,274 22,727 -0- 22,121 E 57,730 S -0- S 51.730 (a> The Town's budget included an additional 5100,000 for water enterprise activities that is not included in this statement because these activities are proprietary in nature. These financial statements should be read only in connection with the accanpanying sumnary of significant accounting policies and notes to financial statements. 4 �� i• TOWN OF MARANA, ARIZONA COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN DEFICIT - ALL PROPRIETARY FUND TYPES - EXHIBIT 4 YEAR ENDED JUNE 30. 1990 Proprietary Totals Fund Types (Memorandum Onlv) Waterja1 Bond/Lease�b� 1990 Operating revenues, cur- rent use charqes S 11,019 Operating expenses Material and supplies 4,375 Depreciation e�ense 1,620 5,995 Operating income Nonoperating revenues • (expenses� Interest income Lease income Bond interest expense Bond fees Lease expense Net loss, deficit �� 5,024 � � $ 2,611 5,291 6,286) 1,616) (_ 6,648) ( 6,648) -0- (� 1,624) -5�0- S 11,019 4,375 1,620 5,995 5.024 2,611 5,291 ( 6,286) ( 1, 616) ( 6,648) ( 6,648) ($ 1,624) (a) Fiscal 1990 was the first year of operations. In fiscal 1989 the water fund was in the development stage. (b) The bond/lease fund commenced operations on March 1, 1990. These financial statements should be read only in connection with the accompanying summary of significant accounting policies and notes to financial statements. 5 ! TOWN OF MARANA, ARIZONA COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES - EXHIBIT 5 YEAR ENDED JUNE 30, 1990 � Cash flows from ooeratina activities Net loss Adjustments to reconcile net toss to net cash used in operating activities: Depreciation Increase in accounts receivable Increase in accounts payable associated with operating activities Proprietary Fund TvDes Water Bond/Lease (f 1,624) 1,620 ( 7,177) 1,620 ( 7,177) Cash used in operating activities Cash flows from investinc activities aurchase of � fixed assets Cash flows from financina activities, increase in due to other fund Net increase in cash Cash, be9innina of vear � Cash, end of vear Ca3 Cash Cash with trustee/fiscal agents Total 2.969 < 4•212) 2,969 ( 4,212> (E 13,050) 4,330 778 4,330 13.050 118 -0- -0- S 778 E 118 S -0- -0- 7,983 E 118 S 7.983 Totals CMemorandim Onlv) 1990 1989 (E 1,624> -0- -0- S 118 S -0- S 118 E -0- 7,983 -0- S 8,101 S -0- (a> Cash on the balance sheet consists of cash the Town can access and cash on deposit with trustee/fiscal age�ts that cannot be accessed. Cash flows from cash with trustee/fiscat agents are not presented above because these activities represent noncash transactions. � Supplemental schedule of noncash activities Cash flows with trustee/fi'scal aaents from investing and other activities Interest and lease income E 7,gp2 E 7,9p2 Purchase of investments ( 47,446) ( 47,446) Net investment in lea5e and purchase of fixed assets (E 279.854) ( 232.988) ( 512,842) � � Cash with trustee/fiscal agents used in investing and other activities Cash flows with trustee/fiscal aaents from financina and other activities Interest and other obligations Proceeds from long-term debt Accounts payable Cash with trustee/fiscal agents provided by financing and other activities Net increase in cash with trustee/fiscal aaents Cash with trustee/fiscal aaents beainnina of vear Cash with trustee/fiscal aaents, end of vear ( 279.854) ( 272,532) ( 552,386) ( 7,902> 232,988 280,000 46,866 8,417 ( 7,902) 512,988 55,283 279.854 280.515 -0- 7,983 -0- -0- S -0- S 7,983 � 560.369 7,983 -0- E 7.983 These financial statements should be read only in connection with the acca�anying surmiary of significant accounting policies and notes to financial statements. 6 � '� TOWN OF MARANA, ARIZONA SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES YEAR ENDED JUNE 30, 1990 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. All funds 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 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, development and planning, legal, public safety, public works and transportation services. The accounting policies of the Town conform to generally accepted accounting principles as applicable to governments. The following i is a summary of the more significant policies: A. Fund accountina 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 com- prise its' assets, liabilities, fund equity, revenues and e�enditures. 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 means 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 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 purposes. Debt service fund - Although such a fund is normally used to account for the accumulation of resources for the payinent of general long-term debt principal, interest and related costs, the Town has not yet established such a fund. Most debt is � funded directly from other funds with no amounts accumulated. f (Continued) 7 � TOWN OF MARANA, ARIZONA SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES YEAR ENDED JUNE 30, 1990 A. Fund accounting (continued� Proprietary funds: Enterprise funds - These funds are used to account for water utility and bond/lease 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 depreciation) of providing water services to the general public on a continuing basis be financed or recovered primarily through user charges. The bond/lease fund, which is a separate corporate entity under Town auspices, is to receive lease payments funded by these user charges to retire the bonds and related interest associated with the acquisition of the water facilities. Cash and investments in this fund are restricted as to their use under the terms of the bond and lease agreement. B. Measurement focus, fixed assets and long-term liabilities The accounting and reporting treatment applied to the fixed assets and long-term liabilities associated with a fund are determined by its measurement focus. Al1 governmental funds are accounted 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 consi- dered a measure of "available spendable resources." Govern- mental fund operating statements present increases (revenues and other financial sources) and decreases (expenditures and other financial uses) in net current assets, as appropriate. Accordinglyy, 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 of accounts, rather than in governmental funds. � Public domain ("infrastructure") general fixed assets con- sisting of certain improvements other than buildings, includ- ing roads, curbs and gutters, streets and sidewalks, bridges and lighting systems, are not capitalized. No depreciation is being provided on general fixed assets. All general fixed assets are valued at historical cost. Donated general fixed assets are valued at their estimated fair values on the dates of donation. 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. (Continued) 8 � �� I• Is I• li � �`, TOWN OF MARANA, ARIZONA SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES YEAR ENDED JUNE 30, 1990 B. Measurement focus, fixed assets and long-term liabilities {continued� 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 general long-term debt group of accounts. The aforementioned two account groups are not funds. They are concerned only with the measurement of financial position. They are not involved with measurement of results of operations. Al1 proprietary funds are accounted for in a cost of services or "capital maintenance" measurement focus. This means that all asset� and all liabilities, whether current or noncurrent, associated with their activity are included on their balance sheets. Their reported fund equity, net total assets, is segregated into contributed capital and retained earnings components. Proprietary fund operating statements present increases (revenues) and decreases (expenses) in net total assets. Water operations property is stated at cost or fair values on the dates of donation. Depreciation of all exhaustible fixed assets used by water operations is charged as an expense against its operations. Accumulated depreciation is reported on the water operations balance sheet. Depreciation is pro- vided over the estimated useful lives of such assets using the straight-line method. These estimated useful lives are as follows: Estimated Useful Lives �Years� I !� iw 1!. Property under capital lease 20 Organization costs 40 Expenditures for water repairs and maintenance are charged to income. Additions, major renewals and replacements that in- crease th� water properties' useful lives are capitalized. The cost of property sold or retired, together with the related accumulated depreciation, is removed from the appropriate accounts and resulting gain or loss is included in net income of the utility. The Town no longer carries any inventory. Supplies needed for operations are now being purchased on an as-needed basis. (Continued) Ir � TOWN OF MARANA, ARIZONA SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES YEAR ENDED JUNE 30. 1990 I• C: li ❑ C. Basis of accountina Basis of accounting refers to when revenues and expenditures 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 proprietary funds are maintained on an accrual basis of accounting. The governmental funds are maintained on a modified accrual basis. The modified accrual basis of accounting recognizes e�enditures 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. Budaets and budgetary accountinq The budgets formally adopted by the Mayor and Council are prepared on a purpose, not object basis. All appropriations lapse at year end, and the budgetary information reflected on the financial statements represents the original adopted budget for fiscal 1990 with no augmentations. E. Encumbran�es 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 budgetary integration in the general fund and special revenue funds. I! �♦ I! F. Reserves No reservations of fund balances have been established by the Mayor and Council at the end of fiscal 1990. (Continued) �� 10 TOWN OF MARANA, ARIZONA SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES YEAR ENDED JUNE 30, 1990 G. Net investment in lease As described in Note 2, the Town accounts for its water util- ity lease as a financing lease, in which the net investment in the lease represents the difference between the bonds and re- lated obligations over the cash and investments in the bond/ lease fund. This difference represents the minimum lease pay- ments to be made by the Town's water utility over the term of the lease. Interest on investments and lease income earned is recognized over the lease term in an amount equal to interest and other expenses. Consequently, no unearned revenue has been recorded. Correspondingly, the lease obligation recorded in long-term debt under the water fund equals the net investment in lease recorded in the bond/lease fund. H. Investments Investments consist of U.S. Government obligations. Invest- ments are stated at cost, which approximates market. I. Note receivable The Town grants commercial loans to businesses in Marana, Arizona, from monies received under its Community Development Block Grant Program. At June 30, 1990, only one such loan had been made to a local business in Marana. A substantial portion of the debtor's ability to honor the terms of this loan is dependent upon the economic conditions in Arizona. The Town requires collateral for all notes receivable. The extent and type of collateral is determined on a case by case basis. J. Allowance for doubtful accounts, grants or note receivable The Town has not established an allowance for doubtful ac- counts, grants or note receivable at June 30, 1990, for none of its receivables were deemed uncollectible at that date. K. Unbilled accounts receivable The water fund's assets and revenues include $5,974 for metered water sales delivered, but unbilled at June 30, 1990. (Continued) 11 ► TOWN OF MARANA, ARIZONA SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES YEAR ENDED JUNE 30, 1990 L. Compensated absences In the general long-term debt group of accounts, essentially the entire accumulated liability for compensated absences is reflected, since the liability at June 30, 1990, will most likely not be paid within the current accounting cycle. Rather, in fiscal 1991 the Town will probably pay that year's accrual without utilizing amounts accrued from prior years. M. Comparative data Comparative total data for the prior year is presented in the accompanying general purpose financial statements in order to provide an understanding of changes in the Town's financial position and operations. N. Total columns on the combined financial statements Total columns on the combined financial statements are cap- tioned "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. Inter- fund eliminations have not been made in the aggregation of this data. During fiscal 1989, a sewer fund, which is a separ- ate corporate entity under Town auspices, was presented as an enterprise fund. The sewer fund was presented as being in the development stage, having $33,721 in organizational costs and accounts payable at June 30, 1989. During fiscal 1990, the board of directors of the sewer fund determined that the $33,721 liability had not been authorized. In addition, all plans for utilizing the sewer fund have been put on hold and there was no activity in this fund during fiscal 1990. As a result of these events, the sewer fund has not been presented in the combined financial statements for fiscal 1990, and the $33,721 presented as organizational costs and as accounts pay- able at June 30, 1989, has been removed from the 1989 total columns. O. Seized property The Town Police have in their custody certain assets seized in criminal proceedings. Until formal procedures have been finalized, the ownership of this property is not determinable. In addition, legal requirements dictate that such assets not be reflected on the Town's financial records in an agency capaeity until any Town ownership has been determined. Conse- quently, no such assets are recorded on these financial statements. This information is an integral part of the accompanying financial statements. 12 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1990 Note 1 - Note receivable The $50,000 note receivable at June 30, 1990, provided under the Community Development Block Grant Program, was bearing interest at 4�, collateralized by certificates of deposit and the principal and interest was due and payable on November 17, 1990. On December 26, 1990, this note was refinanced to continue bearing interest at 4%, to remain collateralized by certificates of deposit and to have interest payments paid monthly beginning in February 1991, with annual principal payments of $5,000 due in April 1993, 1994 and 1995, with the remaining unpaid principal due April 1996. Note 2- Net investment in lease Concurrent with the issuance of bonds (See Note 4), the Town entered into a lease agreement with the Town of Marana Municipal Property Corporation, which is an entity controlled by the Town and accounted for as the bond/lease fund. The agreement specifies that the Town lease from the bond/lease fund the water utility property. The lease requires the Town to pay lease payments equivalent to all costs and charges relating to the leased praperty for a period of twenty years. Such costs and charges include the principal, interest and periodic costs associated with the bond issue. Al1 rights, privileges and obligations related to the leased property inure to the Town, and at the end of the lease term, the leased property reverts to the Town. !' Note 3- Fixed assets, net of accumulated depreciation There were no changes in general fixed assets for 1990. The following is a summary of the general fixed assets at June 30, 1990: Land $ 7,134 Land improvements 123,412 Assets under capital lease 289,353 Machinery, equipment and other assets 277.333 • ! (Continued) $69� 13 • ❑ • TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30. 1990 Note 3- Fixed assets, net of accumulated depreciation (continued� A summary of water fund property, plant and equipment at June 30, 1990, is as follows: � Property under capital lease Organization costs Construction work-in-progress Less accumulated depreciation Note 4 - Long-term debt $232,988 47,523 20,272 300,783 ( 1,620) $29� The water fund leases water utility assets under an agreement classified as a capital lease. As discussed in Note 2, the water fund has an obligation to pay lease payments equivalent to all costs and charges associated with the underlying bond issue in the bond/lease fund, which was issued to finance the purchase of the utility. The following is a schedule by years of the future minimum lease payments required under this capital lease as of June 30, 1990: s Years Ending June 30 1991 1992 1993 1994 1995 Thereafter Total net minimum lease payments Less amount representing interest Present value of net minimum lease payments $ 22,858 22,858 22,858 22,858 32,858 418,248 C� i � 542,538 ( 309,550) 232 988 The long-term debt in the bond/lease fund represents bonds payable as follows at June 30, 1990: Year of Final Original Currently Issue Maturitv Issue Outstandina Lease Revenue Bonds - 1990 2009 (Continued) $ 280,000 $ 280,000 14 � TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1990 Note 4 - Long-term debt (continued1. a a The 1990 Bonds consist of a series of issues with fixed interest rates ranging from 7.55� to 8.30�, depending upon the maturity dates of the various issues. The bond interest and principal requirements are paid through the lease rentals received from the Town's water utility and earnings on investments from bond proceeds. The bonds are collateralized by such lease payments and investments, as well as a first lien against all excise, transaction, privilege, franchise and income taxes which the Town collects. Periodic principal payments are due July l, 1995, through July 1, 2009, in amounts ranging from $10,000 to $30,000 annually. However, the Town does have an option to redeem all of the outstanding bonds in the amount of $280,000 at July 1, 1991, if in good faith, the Town determines it is not advisable to remain in the water business. The Town does not consider it likely that this option will be exercised. Al1 cash and securities are held on deposit with the trustee and are restricted for retirement of indebtedness and payment of improvement costs. The following is a summary of general long-term debt transactions for fiscal 1990: Balances-July 1, 1989 Retirements Capital Leases (a) $ 145,091 ( 53,647) Land Contract(b) Total $ 3,505 $148,596 ( 253) ( 53,900) Balances-June 30, 1990 Long-term portion of accrued vacation and � compensatory time, with a net decrease of $797 over fiscal 1989 � a Total general long-term debt at June 30, 1990 S� (Continued) $ 3�.252 94,696 43,850 138 546 15 1 i� TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1990 Note 4 - Long-term debt (continued�, (a) The following minimum lease June 30, 1990: Years Ending June 30 1991 1992 1993 Total net minimum lease payments Less amount representing interest Present value of net minimum lease payments is a schedule by years of the future payments under capital leases as of $ 50,291 33,286 17,207 100,784 ( 9,340) 91 444 (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 5 - Additional disclosures The Town does not budget on an object basis; therefore, the expenditures on the general purpose financial state- ments have been grouped by purpose, which is the Town's budgetary approach. Although this facilitates budget to actual comparisons, the following analysis is necessary to analyze expenditures by current, capital and debt service (capital lease payments) categories: �• Purpose Administration Development and planning services Town Attorney Public safety Magistrate court Public works Transportation Capital outlay/projects Current O�erations $ 191,350 81,012 81,266 503,268 62,751 207,989 16,343 Capital Debt Outlay Service $ 434 1,675 42,375 12,234 7,542 5106,690 $1,143,979 5106��690 64 260 (Continued) 16 i �� • 1• �� 1� 1• �♦ Fa 1• I• TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30. 1990 Note 5 - Additional disclosures (continuedZ 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 e�enditures over appropria- tions for fiscal 1990 by fund, considering the Town's contingency appropriations. Note 6- Public safety pension plan Al1 of the Town's full-time police officers are covered by the Marana Marshal's Arizona Public Safety Personnel Retirement System, which is a multiple-employer public employee retirement system (PERS). The pension plan provides pension benefits, deferred allowances, death and disability benefits and health in- surance benefits. A member is eligible if he is employed in a covered position prior to attaining age 50 years, for at least 20 hours a week for more than 6 months a year. A member may retire after reaching the age of 62 and com- pletion of 15 years service, or completion of 20 years service with the Town. Benefits vest after 10 years of credited service. Police officers who retire with 25 or more years of credited service are entitled to monthly pension payments for the remainder of their lives equal to 50� of average monthly compensation for the first 20 years of credited service with the Town, plus 2 1/2� of average monthly compensation for each year of credited service above 20 years with the Town. Police officers who retire with 20 years of credited service, but less than 25 years of credited service, are entitled to monthly pension pay- ments for the remainder of their lives equal to 50� of average monthly compensation for the first 20 years of credited service with the Town, plus 2� of average monthly compensation for each year of credited service between 20 and 25 years with the Town. Police officers who retire with less than 20 years of credited service with the Town are entitled to monthly pension payments for the remainder of their lives equal to at least 30� of the average monthly compensation for the entire service period increased at a rate of 4� a year for each service year above the minimum 15 years of service. The maximum monthly pension payment cannot exceed 80� of the average monthly compensation. (Continued) �� 17 � �• �1 1� I• I• �• C TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30 1990 Note 6- Public safety pension plan fcontinued� Pension provisions include deferred allowances whereby a police officer may terminate his employment with the Town after accumulating 10 or more years credited service. Pen- sion benefits are then equal to twice the amount of pen- sion benefits based on the police officer's accumulated contributions. If the police officer does not withdraw his accumulated contributions, the police officer is entitled to these pension benefits upon reaching the age of 62. Pension provisions include disability and death benefits. Disabled officers are entitled to monthly payments for life of 50� of their average monthly compensation or normal pension amount, whichever is greater, if their disability is service connected, regardless of years of credited service. Average monthly compensation (AMC) is one of total compensation paid a member dur- ing the 3 years, out of the last 10 years of credited service, in which the amount paid was highest. If the police officer's disability was not service connected, the disabled officer is entitled to monthly payments for life of 25� of AMC, if the credited service is less than 7 years, 50� of AMC, if the credited service is 7 through 13 years, or 75� of AMC, if the credited service is 14 through 19 years. If the police officer is only tempor- arily,disabled, he is entitled to monthly payments equal to one-twelfth of 50� of compensation paid during the year preceding the date the disability was incurred. The payments terminate after 12 months or prior recovery. Surviving spouses are entitled to two-thirds of the monthly payments the deceased active police officer would have been paid for disability or, in the case of a retired police officer, two-thirds of the retired officer's monthly pension payments. To qualify as a surviving spouse, the spouse must have been married to the deceased for at least 2 years. The spouse's benefits terminate upon her death. Each dependent child of a deceased police officer is entitled to one-ninth of the monthly payments the deceased active police officer would have been paid for disability or, in the case of a retired police officer, one-ninth of the retired officer's monthly pension payments. When the dependent child reaches the age of 18 or 23, if the dependent is a full-time student, the monthly payments will terminate. (Continued) 18 • ■• �• �• 1• li I• I• I• TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1990 Note 6- Public safety pension plan (continued1, Pension provisions include health insurance benefits, whereby the retired police officer or his surviving spouse can elect to be covered by a health insurance plan pro- vided by the Town or state of Arizona. The retired police officer or his surviving spouse pay for this coverage. However, they cannot be charged more than $60 per month plus an amount up to $25 per month for dependent coverage, if any. The Town's current year payroll for eligible police officers amounts to approximately $270,000. Police officers of the Town are required to pay 8� of their gross earnings to the pension plan. The Town makes periodic contributions to the pension plan at actuarially determined rates that, e�cpressed as percentages of annual covered payroll, are designed to accumulate sufficient assets to pay benefits when due. The normal cost and actuarial accrued liability are determined using an entry age actuarial funding method. Unfunded actuarial accrued liabilities are being amortized as a level percent of payroll over a period of 40 years (from July 1, 1978) . During 1990, the Town was required to contribute 6.89� of its police officer's covered payroll to the plan. Total contributions made during fiscal 1990 amounted to $39, 981, of which $18, 500 was made by the Town and $21, 481 was made by police officers. The contributed amounts were actuarially determined as described above and were based on an actuarial valuation as of June 30, 1988. The pension contributions represent funding for normal cost ($17,023) and the amortization of the unfunded actuarial accrued liability ($1,477). Significant actuarial assumptions used to compute pension contribution requirements are the same as those used to determine the standardized measure of the pension obliga- tion. The computation of the pension contribution requirements for fiscal 1990 was based on the same actuarial assump- tions, benefit provisions, actuarial funding method, and other significant factors as used to determine pension contribution requirements in the previous years. (Continued) I• 19 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1990 Note 6- Public safety pension plan (continued) Presented below is the total pension benefit obligation of the Town's PERS. The amount of the total pension benefit obligation is based on a standardized measurement estab- lished by GASB-5 that, with some exceptions, must be used by a PERS. The standardized measurement is the actuarial present value of credited projected benefits. This pension valuation method reflects the present value of estimated pension benefits that will be paid in future years as a result of police officer services performed to date and is adjusted for the effects of projected salary increases. A standardized measure of the pension benefit obligation was adopted by the GASB to enable readers of PERS financial statements to assess the Town's PERS funding status on a going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among such plans. Because the standardized measure is used only for disclo- sure purposes by the Town's PERS, the measurement is inde- pendent of the actuarial computation made to determine contributions to the PERS, as previously explained. A variety of significant actuarial assumptions are used to determine the standardized measure of the pension benefit obligation and these assumptions are summarized below: The present value computed by using a rate is equal to return on current pension plan. of future pension payments was discount rate of 9�. The discount the estimated long-term rate of and future investments of the Future pension payments reflect an assumption of 6.5� (compounded annually) salary increases as a result of inflation. Future pension payments reflect an assumption of additional projected salary increases ranging from 0.0� to 3.0� per year, depending on age, attributable to seniority/merit. • • (Continued) � 20 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30� 1990 �• Note 6- Public safety pension plan (continued� The standardized measure of the assets in excess of the pension benefit obliqation as of June 30, 1990, is as follows: �• ■• �• �• Pension benefit obligation: Retirees and beneficiaries currently receiving benefits and terminated employees not yet receiving benefits Current employees Accumulated employee contributions including allocated investment income Employer-financed vested Employer-financed nonvested Health insurance Total pension benefit obligation Net assets available for benefits Assets in excess of the pension benefit obligation � 62,570 -0- 63,415 2,001 127,986 151,438 23 452 No changes in actuarial assumptions or benefit provisions that'would significantly affect the valuation of the pension benefit obligation occurred during fiscal 1990. During fiscal 1990 and as of June 30, 1990, the Marana Marshal's Arizona PERS held no securities issued by the Town or other related parties. �� ! 1• �� Historical trend information for the Town's PERS is presented below: . Net assets available for benefits as a percentage of the pension benefit ob- ligation applicable to the Town's police officers. Fiscal Year 1990 1989 1988 118.3� 117.8� 112.6� . Unfunded pension benefit obligation as a percentage of the Town's annual cover- ed payroll for police of- ficers. _p_ � (Continued) -0- � -0- � I 21 �� TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30. 1990 Note 6- Public safety pension plan lcontinuedZ Fiscal Year 1990 1989 1988 1• . Town's contributions to the pension plan as a percen- tage of annual covered pay- roll for police officers. 6.89� 5.85� 4.39� Historical trend information is presented in order for a reader to assess the progress made in accumulating suf- ficient assets to pay pension benefits as they become payable. 1� �• �• Note 7- Commitments and 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 liabilities exist at June 30, 1990. At June 30, 1990, the Town had made a commitment to loan a local business in Marana $30,000. The source of the funding for this loan was to come from the Town's Commun- ity Development Block Grant Program with Pima County. The Town is continuously liable in respect to other claims incidental to the ordinary course of its operations. At June 30, 1990, 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 has determined that $33,721 in prior year costs incurred in organizing the sewer activity were never authorized and are under dispute. The creditors at this date have not pushed for payment on these amounts. 1• 1• Note 8 - Subsequent 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, 1992, then $35,000 a year through June 30, 2D17. The Town will have an option to purchase the complex through June 30, 1992, for the maximum sum of $250,000, with annual reductions of $10, 000 a year in the purchase price through the remainder (Continued) �� 22 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1990 s �• Note 8 - Subseauent events (continuedZ of the lease term. Rent for the year ended June 30, 1991, will be prorated based upon the date of occupancy. The option price is based upon the anticipated costs of con- struction, and it may vary downward if there are cost savings. The Town moved its administration offices into the new facility during October 1990. The Town has tentatively agreed to take over ownership and care of the Marana Park from Pima County. If this agree- ment is finally accepted, Pima County has agreed to sub- sidize the Town $250,000 over a 2 1/2 year period to maintain the park. �• �� The Town, due to its growth, was experiencing cash flow shortages at fiscal year end. Its major creditors have been working with the Town, and the Town has embarked on a program to identify new tax revenue sources in order to keep from curtailing some of its public services. As a result, the Town has started a sales tax audit program that has resulted in the collection of approximately $190,000 in additional sales tax revenue through January 1991 from businesses located in the Town that had not previously been remitting sales tax. Note 9 - Report classification Certain previously reported amounts have been reclassified to conform to fiscal 1990 report classifications. �• I� • This information is an integral part of the accompanying financial statements. � 23 ; � . �_ ��., � � �� - �� Clifton, � � ,�� ' Gunder�on & Co. `� Ce't�Tied F'uGl�� Fu:wurdar,t:, & C�nsuNants Honorable Mayor and Town Council Town of Marana � � Marana, Arizona INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL STRUCTURE REQUIRED BY OMB CIRCULAR A-128 we have audited the general purpose financial statements of the Town of Marana as of and for the year ended June 30, 1990, and have issued o�r report thereon dated February 18, 199I. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the � Comptrol2er General of the United States, and Office of Management and Budget (OMB) Circular A-128, "Audits of State and Local Govern- ments." Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. In planning and performing our audit of the general purpose finan- cial statements of the Town for the year ended June 30, 1990, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressinq an opinion on the financial statements and not to provide assurance on the int�rnal control structure. During the year ended June 30, 1990, the Town had no major federal financial assistance programs and expended 100� percent af its total federal financial assistance under the followinq nonmajor federal financial assistance programs: a. Community Development Block Grant b. Metropolitan Area Narcotics Tactical Investigative Squads Grant As required by OMB Circular A-128 our consideration of the internal control structure also included obtaining an understanding of the design of internal control structure policies and procedures that we considered relevant to preventing or detecting material noncom- pliance with specific and general requirements that are applicable to the Town's nonmajor federal financial assistance programs and whether they have been placed in operation. 24 �>>30NH � CUiC7ftk;�G I;IIfdUI° {NDIHNA IOWA MARYLANU MISSOURI � NEW MEXICO OHIO WISCONSIN MEMBERS OF i NR INTERNAT�ONAL A Woridwide Auociet�cl ot IndependeM ! Accounifnp FHms MEMBERS OF AMERICA INSTITUTE QF CERTIFIED', PUBLIC ACCOIiNTAN?$� � ' ' . < , , .� �, �- ' � Honorable Mayor and Town Council Page 2 Town of Marana The management of the Tawn is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are reguired ,•> to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reason- able, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transac- tions are executed in accordance with management's authorization and xecorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that federal financial assistance programs are managed in compliance with applicable laws and regulations. Because of inherent limitations in any internal control structure, errors, irregularities, or instances of noncompliance may neverthe- less occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies ' and procedures may deteriorate. For the purpose of this report, we have classified the significant internal control structure policies and procedures in the following categories: Federal financial reports (Not applicable) Drug free environment Timely reports - other Indirect costs (Not applicable) Specific requirements: Eligibility Cash management (Not applicable) Relocation assistance and real property acquisition (Not applicable) Cash Fixed assets Long-term debt Revenue, receivables, and receipts Expenditures and accounts payable Governmental financial assistance programs: General requirements: Political activity Davis-Bacon Act Civil rights For all of the internal control structure categories listed above, we obtained an understanding of the design of relevant po3icies and procedures and determined whether they have been placed in opera- tion, and we assessed control risk. 25 �; ��. r �� 6 Honorable MayQr Town of Marana and Town Council Page 3 We noted certain matters involving the internal control structure and its aperation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportab2e conditions involve matters coming to '� our attention relating to significant deficiencies in the design or operation of the internal control structure that, in our judgment, could adversely affect the entity's ability to xecord, process, summarize, and report financial data consistent with the assertions of management in the financial statements or to administer federal financial assistance programs in accordance with applicable laws and regulations. We noted the following reportable conditions: 1. Accounting system Condition: The Town's accounting system utilized for fiscal 1990 resulted in the following conditions: a . b. c. d. e . f. The general ledger was not segregated by fund. The general ledger did not incorporate any of the activity associated with the water fund, bond/lease fund, and the account group types for general fixed assets and general long-term debt. The general ledger only included postings of cash receipts and cash disbursements for fiscal 1990. the general ledger did not include postings of beginning account balances or adjustments to put the general ledger on an accrual or modified accrual basis, as necessary. Monthly bank reconciliations were not performed for the general fund cash account. There were several cash receipts in the cash receipts journal that could not be identified as to source or documented as to propriety. The activity in the cash receipts journal was not being reconciled to monthly activity reports prepared by the various departments. Recommendation: We recommend the Town upgrade its current accounting system to segregate activity by fund and to include all activity under the direct control of the Town. We also suggest accaunting procedures be adopted to include performing monthly bank reconciliations for all cash accounts, maintain- ing documentation and support for all cash receipts recorded in the cash receipts journal, reconciling activity recorded in the general ledger to departmental monthly activity reports, and maintaining the general ledger on an appropriate basis. 26 � t , t � Honorable �layor and Town Council Town of Mara�a I. Accountinc� system (continued) 1 Page 4 Management's response: Management has been utilizing an outside consultant to upgrade the accounting system's capabil- '�' ities. This upgrading process will take time due to the Town's rapid expansion. The Town is also in the process of consider- ing the need to have a full-time or part-time accountant and developing an accounting procedures manual. Any final deci- sions in these areas will be put on hold until a new Town Manager is hired. 2. Bud ets 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 limita- tion concerns, the Town approved a budget for fiscal 1390 that was somewhat unrealistic. - Recommendation: We recommend that management budget by object and augment this budget on a periodic basis, especially for federal programs, so as to insure the ability to compare bud- geted and actual data in a meaningful manner. Management also needs to prepare budgets that are reflective of expected activity. The benefit is an improved means by which management ' can make decisions and insure adherence to budgetary require- ments. Management's response: Management will work closely with the auditors to improve accounting procedures for the development of better budgets. 3. Fixed asset inventorv Condition: The Town has not recently conducted a reconcilia- tion of its physical property records and the items reflected in its general fixed assets group of accounts. Recommendation: We recommend that a physical inventory of property be conducted in the near futu�e, for example at June 30, 1991, and that a reconciliation of that inventory be made to the general ledger, with all appropriate adjustments being investigated and made. Management's respor�se: As soon as it is practicable, manage- ment will work with its auditors to implement procedures to perform a fixed asset inventory. 27 � � i . � _:r �� Honorable Mayor and Town Council Town of Marana 4. Coordination of manaqement's efforts Page 5 Condition: Currently, the Town has several individuals that �-' are responsible for and have knowledge of their individual departments or funds . However, there is not one person in Town management who has full knowledge of activities in all depart- ments or funds. For example, the water fund is being managed by an individual who is not a part of Town's management, and the water fund's accounting activity is not being maintained as a part of the Town's accounting records. It appears there is no one in Town's management who has much knowledge of how the water fund is operating or what financial decisions are being made within the water fund. Recommendation: We recommend that, in selecting a new Town Manager, the Town select a candidate with qualifications that include an understanding of both accounting and financial issues and a conceptual understanding of all services the Town is currently providing and anticipates providing in the future. These abilities should provide the Town a Manager who will be aware of all major activities occurring within departments and funds, will be able to coordinate activities between departments and funds, and will be able to address problems before they arise from an accounting and financial point of view. Management's response: The Town is currently conducting a process of reviewing the applications for individuals who are interested in becoming the new Town Manager. This selection process will take into consideration the auditor's recommenda- tion: A material weakness is a reportable condition in which the design or operation of the specific internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the general purpose financial statements being audited or that noncom- pliance with laws and regulations that would be material to a federal financial assistance program may occur and not be detected within a timely period by employees in the normal course of per- forming their assigned functions. Our consideration of the internal control structure wauld not necessarily disclose all matters in the internal control structure that might be reportable conditions and, accordingly, would nat necessarily disclose all reportable conditions that are also consi- dered to be material weaknesses as defined above. However, we be- lieve all of the reportable conditions described above are material 28 i '��',• ' ' ` � f Honorable Mayor and Town Council Page 6 Town of Marana� weaknesses. It should be noted that comments 1, 2 and 3 are re- occurring. However, the failure to address prior year comments has been due, more than anything else, to the fact that the Town has t� had a new Town Clerk and Town Manager in fiscal 1990. If the Town had r�ot experienced as much turnover in its management, it is likely these reoccurring comments would have been addressed. 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 public record. . jJ' ,�i�► o�l.� o�v 1 �•.d , , Tucson, Arizona February 18, i991 29 1 x Gluftdn n erson & Co. Certified Public Accountants & Consultants August 30, 1990 Evelyn Casuga, Town Manager Town of Marana 12775 North Sanders Rd. Marana, Arizona 85653 Dear Evelyn: 19yv /Fwli t �tt� We are pleased to serve you as yaur independent accountants. The purpose of this letter is to confirm the terms of our engagement and to clarify the nature and extent of the auditing and accounting services to be provided. Frank Auletta will be the client partner responsible for these services to be provided to you. Ron Kovar will also be assigned to you. The purpose of this arrangement is to have another person known to you and your associates, who is familiar with your opera- tions and who can substitute for Frank should he not be available to you. We hope you will call either of these persons when you believe the firm can be of assistance. Our services will include: Auditinq services. We will audit the combined financial statements and the supplementary schedule of federal financial assistance of the Town of Marana as of June 30, 1990, and for the year then ended. Our audit will include an examination of your compliance with laws, rules,and regulations�including those related to the expenditure of federal financial assistance. Our audit wiil be made in accordance with generally accepted auditing standards, the Single Audit Act of 1984, OMB Circular A-128, and the financial and compliance requirements set forth in Government Audit Standards issued by the Comptroller General of the United States, an essential part of which is the review and evaluation of your systems of internal control (accounting and administrativ�), and will include tests of your accounting records and other procedures we consider necessary to enable us to express our opinion on these financial statements, our opinion or comments on your compliance with laws, rules,'and regulatians, and our comments on your systems of internal control. We wili also audit your annual expenditure limitation report. Accounting services. We will also provide you with the following nonaudit services: 1. Assistance with the preparation of your financial state- ments. 2. Assistance with adjusting journal entries and accounting services work required to make the records auditable. ARIZONA COLORADO ILLINOIS INDIANA IOWA MARVLAND MISSOURI NEW MEXICO OHIO WISCONSIN MEMBERS OF NR INTERNATIONAL A Woridwide Association of Independent AccounTing firms MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS v Evelyn Casuga, Town Manager August 30, 1990 Town of Marana Page 2 It is understood that although the purpose and objective of our audit is to lead to the exgression of an unqualified opinion with respect to the combined financial statements, circumstances may exist or may arise which would preclude submitting such an opinion. Shauld circumstances be discovered which would have an effect on our opinion, we will inform you as promptly as possible and attempt to arrive at a conclusion acceptable to both of us. If our opinion will be other than unqualified, the reasans will be fully disclosed. If, in the course of our audit, we should discover evidence indicating the gossible existence af fraud, defalcations, other illegal acts ar similar irregularities on the part of an officer or employee o€ the Town of Marana, we reserve the right to promptly make a report of such discovery to the appropriate law enforcement authoritfes andjor appropriate federal government officials, in accordance with the requirements of the Single Audit Act of 1984 and related federal government pronouncements. A copy of the audit regort and any'related workpapers may also be provided to such law enforcement authorities and/or federal government officials for appropriate follaw up action. We will, of course, inform you promptly of any findings which appear to be unusual or abnormal. We call your attention to the fact that management has the re- sponsibility for the proper recording of transactions, for the safeguarding of assets, and for the substantia2 accuracy of the fi- nancial statements. Although our firm may have prepared or assisted in preparing your financial statements, the statements are the representations of management. In connection with this responsibility, you agree to provide us, priar to the delivery date of the financiai statements, with written confirmation of the representations made to us by you and your staff during the course of our engagement. Tf reproduction or publication of the financial statements which we have audited, or any part of them, is anticipated for purposes of distribution outside your management, we require that we be permitted to approve the masters or printer's proofs before publi- cation, if our firm's name is to be connected with the statements or report in any way. Fees for our services will be approximately $8, 000, and will be based on our normal billing rates. If any additional services are required, or any unantieipated problems arise, we wi13. discuss any additional fees before providing the necessary services. Our fees include out-of-pocket costs, and will be billed and are payable every two weeks as the work progresses. If the above terms are in accordance with your understanding and acceptable to you, please sign, date, and return the duplicate copy af this letter to us. � � � : � ; .. Evelyn Casuga, Town Manager August 30,1990 Town of Marana Page 3 We very much appreciate the opportunity to serve you, and wi13 be pleased to discuss any questions you may have. Very truly yours, . ,4,K,, 04.�� s � , � The services described in the foregoing letter are in aecordance with our requirements and we understand the terms and condi.tions recited above. Aeknowledged: Tawn of Marana Tow•� /�'lu,,.a Name Titl Dat� � v , �u� � �i ii i �- • . : �