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HomeMy WebLinkAbout021323 State Auditor Exit ConferenceSPECIAL SESSION PORT TOWNSEND CITY COUNCIL AGENDA CITY HALL COUNCIL CHAMBERS, 540 WATER STREET State Auditor Exit Conference 10:00 a.m. February 13, 2023 Attend in person or virtually via computer or tablet at.h..t.t.p./joiriwebiriar,,coni enter the 9 digit Webinar ID 886-008-115 Phone only (muted - listen -only mode) United States: Local Dial In — (360) 390-5064 option 12 access code: 761-430-270# If you are experiencing technical difficulties, please attempt all methods listed above before reporting any issues to c..I..e.rksuppgq@!;�ityofpt.us- 1. Call to Order 11. State Auditor Exit Conference (The Port Townsend City Council will attend the State Auditor Exit Conference.) 111. Adjourn a, 1190NE40111T M1, The Office of the Washington State Auditor's vision is increased trust in government. Our mission is to provide citizens with independent and transparent examinations of how state and local governments use public funds, and develop strategies that make government more efficient and effective. The purpose of this meeting is to share the results of your audit and our draft reporting. We value and appreciate your participation. We will publish the following reports: • Accountability audit for January 1, 2020 through December 31, 2021 — see draft report. • Financial statement audit for January 1, 2020 through December 31, 2021 — see draft report. Audit Hi hli lits We would like to thank City staff, especially Finance Manager Ron Logghe and Public Experience Liaison Naomi Stern, for their cooperation and timely response to audit requests throughout the audit process. Recommendations not included in the Audit Reports Exit Items We have provided exit recommendations for management's consideration. Exit items address control deficiencies or noncompliance with laws or regulation that have an insignificant or immaterial effect on the entity, or errors with an immaterial effect on the financial statements. Exit items are not referenced in the audit report. Financial Statement Audit Communication We would like to bring the following to your attention: • We didn't identify any material misstatements during the audit. • Uncorrected misstatements in the audited financial statements are summarized on the attached schedule. We agree with management's representation that these misstatements are immaterial to the fair presentation of the financial statements. However, the conditions that led to these misstatements may result in more significant misstatements if not corrected. • The audit addressed the following risks, which required special consideration: o Due to the possibility that management may be able to circumvent certain controls, standards require the auditor to assess the risk of management override. Finaiii o r Audit Report Publication Audit reports are published on our website and distributed via email in a .pdf file. We also offer a subscription service that notifies you by email when audit reports are released or posted to our website. You can sign up for this convenient service at https://portal.sao.wa.gov/SAOPortal. Management Representation Letter We have included a copy of representations requested of management. Audit Cost At the entrance conference, we estimated the cost of the audit to be $40,000, plus travel costs and actual audit costs will approximate that amount. Your Next Scheduled Audit Your next audit is scheduled to be conducted in summer 2024 and will cover the following general areas: • Accountability for public resources for January 1, 2022 through December 31, 2023 • Financial statement for January 1, 2022 through December 31, 2023 • Federal programs for January 1, 2023 through December 31, 2023 The estimated cost for the next audit based on current rates is $62,000 plus travel expenses. This preliminary estimate is provided as a budgeting tool and not a guarantee of final cost. Audit Survey When your report is released, you will receive an audit survey from us. We value your opinions on our audit services and hope you provide feedback. Local Government Support Team This team provides support services to local governments through technical assistance, comparative statistics, training, and tools to help prevent and detect a loss of public funds. Our website and client portal offers many resources, including a client Help Desk that answers auditing and accounting questions. Additionally, this team assists with the online filing of your financial statements. The Center for Government Innovation The Center for Government Innovation at the Office of the Washington State Auditor offers services specifically to help you help the residents you serve at no additional cost to your government. What does this mean? We provide expert advice in areas like Lean process improvement, peer-to-peer networking, and culture -building to help local governments find ways to be more efficient, effective and transparent. The Center can help you by providing assistance in financial management, cybersecurity and more. Check out our best practices and other resources that help local governments act on accounting standard changes, comply with regulations, and respond to recommendations in your audit. The Center understands that time is your most precious commodity as a public servant, and we are here to help you do more with the limited hours you have. If you are interested in learning how we can help you maximize your effect in government, call us at (564) 999-0818 or email us at Center(a,sao.wa. gov. Please contact us with any questions about information in this document or related audit reports. Kelly Collins, CPA, CFE, Director of Local Audit, (564) 999-0807, Ke11y.Collins(&sao.wa.gov Tina Watkins, CPA, Assistant Director of Local Audit, (360) 260-6411 Tina.Watkins(&sao.wa.gov Amy Strzalka, CPA, Program Manager, (360) 845-1476, Amy.Strzalka(ausao.wa.gov Melinda Seibert, Assistant Audit Manager, (360) 845-1485, Melinda.Seibert(ausao.wa.gov Tammy Lane, Audit Lead, (360) 845-1482, Tammy.Lane(asao.wa.gov 3 M Accountability Audit Report J" 0 %-,ity of Port Townsenq, For the period January 1, 2020 through December 31, 2021 Published (Iriserted Icy 019 Report No. 1032052 Find out what's new at SAO by scanning this code with your smartphone's camera Office of the Washington State Auditor Pat McCarthy Issue Date — (Inserted by OS) Mayor and City Council City of Port Townsend Port Townsend, Washington Thank you for the opportunity to work with you to promote accountability, integrity and openness in government. The Office of the Washington State Auditor takes seriously our role of providing state and local governments with assurance and accountability as the independent auditor of public accounts. In this way, we strive to help government work better, cost less, deliver higher value and earn greater public trust. Independent audits provide essential accountability and transparency for City operations. This information is valuable to management, the governing body and public stakeholders when assessing the government's stewardship of public resources. Attached is our independent audit report on the City's compliance with applicable requirements and safeguarding of public resources for the areas we examined. We appreciate the opportunity to work with your staff and value your cooperation during the audit. Sincerely, Pat McCarthy, State Auditor Olympia, WA Americans with Disabilities In accordance with the Americans with Disabilities Act, we will make this document available in alternative formats. For more information, please contact our Office at (564) 999-0950, TDD Relay at (800) 833-6388, or email our webmaster at ebmas�ter6d))sao.wa. �. Insurance Building, P.O. Box 40021 • Olympia, Washington 98504-0021 • (564) 999-0950 • Pat. McCarthy@sao.wa.gov 5 AuditResults................................................................................................................................... 4 RelatedReports............................................................................................................................... 5 Ift Informationabout the City.............................................................................................................. 6 ka About the State Auditor's Office ..................................................................................................... 7 hOIOII HIIOIflk 01111111111111111 ME 040 ka 111IIN�I�I NO N s ilil�ll An Am Ism Ism 1111 1111111111111110 uluuuuu HP Office of the Washington State Auditor sao.wa.gov 6 Results in brief N This report describes the overall results and conclusions for the areas we examined. In those Go Ift selected areas, City operations complied, in all material respects, with applicable state laws, regulations, and its own policies, and provided adequate controls over the safeguarding of public ta resources. hu�u�l In keeping with general auditing practices, we do not examine every transaction, activity, policy, internal control, or area. As a result, no information is provided on the areas that were not examined. 0 ilk 1111111111111111 ME 040 ta liII11111111111111 About the audit This report contains the results of our independent accountability audit of the City of Port 111160 Townsend from January 1, 2020 through December 31, 2021. 1,Ill, Management is responsible for ensuring compliance and adequate safeguarding of public resources Ma from fraud, loss or abuse. This includes the design, implementation and maintenance of internal do controls relevant to these objectives. o This audit was conducted under the authority of RCW 43.09.260, which requires the Office of the NO Washington State Auditor to examine the financial affairs of all local governments. Our audit Go Ift involved obtaining evidence about the City's use of public resources, compliance with state laws and regulations and its own policies and procedures, and internal controls over such matters. The procedures performed were based on our assessment of risks in the areas we examined. s Based on our risk assessment for the years ended December 31, 2021 and 2020, the areas examined Mimm were those representing the highest risk of fraud, loss, abuse, or noncompliance. We examined the following areas during this audit period: • Accounts receivable — utility billing, adjustments and collections • Accounts payable — general disbursements and credit cards NUME • Payroll — gross wages, overtime, bereavement leave, leave cash outs, bonus and N incentive payments and final pay to departing employees • Self-insurance for unemployment OUR • Open public meetings — compliance with minutes, meetings and executive session requirements • Financial condition — reviewing for indications of financial distress Office of the Washington State Auditor sao.wa.gov 7 Our opinion on the City's financial statements is provided in a separate report, which includes the City's financial statements. That report is available on our website, °°"""P httpLlportal.s io.wa. ov/.epolt e arch. im muu I., uu 01111111111111111 am u40 th Nuuuuuuuu uw� uuA ®immmmm uuuuuW MIN m MG v C u us muuuu mm Office of the Washington State Auditor sao.wa.gov The City of Port Townsend serves 9,485 citizens in Jefferson County. The City provides an array of services including water, sewer, storm drainage, police, parks and recreation, planning, street maintenance and construction, library and general administrative services. The City contracts for fire protection, court, jail and emergency medical services. A private company provides solid waste collection services. An elected, seven -member Council governs the City. The Council appoints a Manager to oversee the City's daily operations and approximately 130 employees. For 2021 and 2020, the City's operating revenues were approximately $29.7 million and $24.1 million, respectively. Contact information related to this report City of Port Townsend Address: 250 Madison Street Suite 1 Port Townsend, WA 98368 Contact: Ron Logghe, Finance Manager Telephone: (360) 379-4406 Website: www.cityofpt.us Information current as of report publish date. Audit history You can find current and past audit reports for the City of Port Townsend at http.L//Zort,ti.,,ao.wa,&�ov/Report,Search. Office of the Washington State Auditor sao.wa.gov 9 The State Auditor's Office is established in the Washington State Constitution and is part of the executive branch of state government. The State Auditor is elected by the people of Washington and serves four-year terms. We work with state agencies, local governments and the public to achieve our vision of increasing trust in government by helping governments work better and deliver higher value. In fulfilling our mission to provide citizens with independent and transparent examinations of how state and local governments use public funds, we hold ourselves to those same standards by continually improving our audit quality and operational efficiency, and by developing highly engaged and committed employees. As an agency, the State Auditor's Office has the independence necessary to objectively perform audits, attestation engagements and investigations. Our work is designed to comply with professional standards as well as to satisfy the requirements of federal, state and local laws. The Office also has an extensive quality control program and undergoes regular external peer review to ensure our work meets the highest possible standards of accuracy, objectivity and clarity. Our audits look at financial information and compliance with federal, state and local laws for all local governments, including schools, and all state agencies, including institutions of higher education. In addition, we conduct performance audits and cybersecurity audits of state agencies and local governments, as well as state whistleblower, fraud and citizen hotline investigations. The results of our work are available to everyone through the more than 2,000 reports we publish each year on our website, .o ao.wa.�. Additionally, we share regular news and other information via an email subscription service and social media channels. We take our role as partners in accountability seriously. The Office provides training and technical assistance to governments both directly and through partnerships with other governmental support organizations. • Fi1A our audit team • Regqst public records • Search BARS Manuals (CiAAE and cash.), and find resorting templates • Learn about our training workshops and on -demand videos • Discover which governments serve you enter an address on our map • Explore public financial data with the financial lntellience Tool Other ways to stay in touch • Main telephone: (564) 999-0950 • Toll-free Citizen Hotline: (866) 902-3900 • Email: e.__rmn h .r.(y)sao.wa. ov Office of the Washington State Auditor sao.wa.gov 10 mP um uuuuuuuu umn Mp IN Mv to C Kv go us III 111101nv 1 Immm ouuull�lll ' C mom mom m0 mluluuuuu Financial Statements Audit Report %-,ity ofPort Townsenci- For Published (Inserted by 0,5) Report No. 1.032059 Find out what's new at SAO by scanning this code with your smartphone's camera ■ is Office of the Washington State Auditor Pat McCarthy Issue Date — (Inserted by OS) W la am Mayor and City Council City of Port Townsend 111111110 Port Townsend, Washington iiuiii 1111110 Report on Financial Statements NEW 11' ������Please find attached our report on the City of Port Townsend's financial statements. ON We are issuing this report in order to provide information on the City's financial activities and uuuuuu�10 WuuoioiCondition. W WW ouu3 W Sincerely, 140 1111110 Pat McCarthy, State Auditor 11111111111111110 5111111 Olympia, WA WdIIIIIWy Muuuuuu ulu inW fo C IN= FEB m miuyhuuuumCL In accordance with the Americans with Disabilities Act, we will make this document available in alternative formats. For more information, please contact our Office at (564) 999-0950, TDD Relay at (800) 833-6388, or email our webmaster at vacDb�� as�ter0),s�ao..wa. Insurance Building, P.O. Box 40021 • Olympia, Washington 98504-0021 • (564) 999-0950 • Pat. McCarthy@sao.wa.gov 12 11111111111111110 bu I., 01111111111111111 am �40 th 060 00 to C Kv go uslumm s iiiiihlll bw Am C mom mom m0 miuuuuuu Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards..................................................................................................... 4 Independent Auditor's Report on the Financial Statements............................................................ 7 FinancialSection........................................................................................................................... I I About the State Auditor's Office................................................................................................... 62 Office of the Washington State Auditor sao.wa.gov 13 Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards City of Port Townsend January 1, 2020 through December 31, 2021 Mayor and City Council City of Port Townsend Port Townsend, Washington We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the City of Port Townsend, as of and for the years ended December 31, 2021 and 2020, and the related notes to the financial statements, which collectively comprise the City's financial statements, and have issued our report thereon dated February 13, 2023. We issued an unmodified opinion on the fair presentation of the City's financial statements in accordance with its regulatory basis of accounting. We issued an adverse opinion on the fair presentation with regard to accounting principles generally accepted in the United States of America (GAAP) because the financial statements are prepared by the City using accounting practices prescribed by state law and the State Auditor's Budgeting, Accounting and Reporting System (BARS) Manual described in Note 1, which is a basis of accounting other than GAAP. The effects on the financial statements of the variances between the basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. REPORTING In planning and performing our audits of the financial statements, we considered the City's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial Office of the Washington State Auditor sao.wa.gov 14 statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described above and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. However, this Office of the Washington State Auditor sao.wa.gov 15 11110inv C mom mom m� u° uuuuuu DIN report is a matter of public record and its distribution is not limited. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations. Pat McCarthy, State Auditor Olympia, WA February 13, 2023 Office of the Washington State Auditor sao.wa.gov Report on the Audit of the Financial Statements City of Port Townsend January 1, 2020 through December 31, 2021 Mayor and City Council City of Port Townsend Port Townsend, Washington We have audited the financial statements of the City of Port Townsend, as of and for the years ended December 31, 2021 and 2020, and the related notes to the financial statements, as listed in the financial section of our report. As described in Note 1, the City has prepared these financial statements to meet the financial reporting requirements of state law and accounting practices prescribed by the State Auditor's Budgeting, Accounting and Reporting System (BARS) Manual. Those accounting practices differ from accounting principles generally accepted in the United States of America (GAAP). The differences in these accounting practices are also described in Note 1. In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the cash and investments of the City of Port Townsend, and its changes in cash and investments, for the years ended December 31, 2021 and 2020, on the basis of accounting described in Note 1. The financial statements referred to above were not intended to, and in our opinion, they do not, present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the City of Port Townsend, as of December 31, 2021 and 2020, or the changes in financial position or cash flows thereof for the years then ended, because of the significance of the matter discussed below. Office of the Washington State Auditor sao.wa.gov 17 Basis for Unmodified and Adverse Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GARS) and Government Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit unmodified and adverse opinions. Auditing standards issued by the American Institute of Certified Public Accountants (AICPA) require auditors to formally acknowledge when governments do not prepare their financial statements, intended for general use, in accordance with GAAP. As described in Note 1 of the financial statements, the financial statements are prepared by the City in accordance with state law using accounting practices prescribed by the BARS Manual, which is a basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between the regulatory basis of accounting and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material and pervasive. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of state law and the BARS Manual described in Note 1. This includes determining that the basis of accounting is acceptable for the presentation of the financial statements in the circumstances. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Our objectives are to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Office of the Washington State Auditor sao.wa.gov 18 Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. Performing an audit in accordance with GAAS and Government Auditing Standards includes the following responsibilities: • Exercise professional judgment and maintain professional skepticism throughout the audit; • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements; • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, no such opinion is expressed; • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements; • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for a reasonable period of time; and • We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control -related matters that we identified during the audit. Supplementary Information Our audits were conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's financial statements. The Schedules of Liabilities are presented for purposes of additional analysis, as required by the prescribed BARS Manual. These schedules are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and Office of the Washington State Auditor sao.wa.gov 19 other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. REPORTINGOTHER AUDITIN STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated February 13, 2023 on our consideration of the City's internal control over financial reporting and on the tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. Pat McCarthy, State Auditor Olympia, WA February 13, 2023 Office of the Washington State Auditor sao.wa.gov 20 d iiiihlll immm C mom mom m0 miufinuuuuu DIN City of Port Townsend January 1, 2020 through December 31, 2021 Fund Resources and Uses Arising from Cash Transactions — 2021 Fund Resources and Uses Arising from Cash Transactions — 2020 Fiduciary Fund Resources and Uses Arising from Cash Transactions — 2021 Fiduciary Fund Resources and Uses Arising from Cash Transactions — 2020 Notes to the Financial Statements — 2021 Notes to the Financial Statements — 2020 Schedule of Liabilities — 2021 Schedule of Liabilities — 2020 Office of the Washington State Auditor sao.wa.gov 21 The State Auditor's Office is established in the Washington State Constitution and is part of the executive branch of state government. The State Auditor is elected by the people of Washington and serves four-year terms. We work with state agencies, local governments and the public to achieve our vision of increasing trust in government by helping governments work better and deliver higher value. In fulfilling our mission to provide citizens with independent and transparent examinations of how state and local governments use public funds, we hold ourselves to those same standards by continually improving our audit quality and operational efficiency, and by developing highly engaged and committed employees. As an agency, the State Auditor's Office has the independence necessary to objectively perform audits, attestation engagements and investigations. Our work is designed to comply with professional standards as well as to satisfy the requirements of federal, state and local laws. The Office also has an extensive quality control program and undergoes regular external peer review to ensure our work meets the highest possible standards of accuracy, objectivity and clarity. Our audits look at financial information and compliance with federal, state and local laws for all local governments, including schools, and all state agencies, including institutions of higher education. In addition, we conduct performance audits and cybersecurity audits of state agencies and local governments, as well as state whistleblower, fraud and citizen hotline investigations. The results of our work are available to everyone through the more than 2,000 reports we publish each year on our website, ww.w.o� ao..wa:.gov. Additionally, we share regular news and other information via an email subscription service and social media channels. We take our role as partners in accountability seriously. The Office provides training and technical assistance to governments both directly and through partnerships with other governmental support organizations. • 1[ ind your audit team • Request ubiic records • Search BARS Manuals (3AAE and cash), and findrepoing templates • Learn about our fraying workshops and on-demmd videos • Discover which governments serve X7eNIN enter an address on our map • Explore public financial data with the Financial Intellivence Tool Other ways to stay in touch • Main telephone: (564) 999-0950 • Toll-free Citizen Hotline: (866) 902-3900 • Email: webmaster(y7,sao.wa.Doy Office of the Washington State Auditor sao.wa.gov 22 2020 Summary of Uncorrected Items The City incorrectly accrued transactions outside, of the, 20 Fund Resources and Uses Arising day open period (RCW 35A.33.151D) back to 2020. This from Cash Transactions (C-4) overstated expenditures and understated lending cash by $216,278 2021 Summary of Uncorrected Items StAteme, ht 1, S'dhodul,6 Doscription'' The, City incorrectIly accrued,transactions not related to the prior period or outside of the 20 day open period Fund Resources and Uses Arising (R a+' 35A.33.1510). This caused beginning cash, to be, from Cash Transactions (C-4) understated $216,278, expendituresto be understated by $47,03,5 and ending cash to be understated by $169,242. There is an unexplained difference, in, encling cashi the financiall statements report $4,400 less in ending cash, than identified iin, our reconciliation. Fund Resources and Uses Arising from Cash Transactions (C-4) The, City was not able, to provide support or inforniation, to, expiain this, difference. We, cannot confirm whether this difference may be due to, valid reconciling items or poss 1 bi e, error. 23 LETTER OF REPRESENTATION TO BE TYPED ON CLIENT LETTERHEAD February 13, 2023 Office of the Washington State Auditor 3200 Capitol Blvd P.O. Box 40031 Olympia, WA 98504-0031 To the Office of the Washington State Auditor: We are providing this letter in connection with your audit of the City of Port Townsend for the period from January 1, 2020 through December 31, 2021. Representations are in relation to matters existing during or subsequent to the audit period up to the date of this letter. Certain representations in this letter are described as being limited to matters that are significant or material. Information is considered significant or material if it is probable that it would change or influence the judgment of a reasonable person. We confirm, to the best of our knowledge and belief, having made appropriate inquires to be able to provide our representations, the following representations made to you during your audit. If we subsequently discover information that would change our representations related to this period, we will notify you in a timely manner. General Representations: 1. We have provided you with unrestricted access to people you wished to speak with and made available all relevant and requested information of which we are aware, including: a. Financial records and related data. b. Minutes of the meetings of the governing body or summaries of actions of recent meetings for which minutes have not yet been prepared. c. Other internal or external audits, examinations, investigations or studies that might concern the objectives of the audit and the corrective action taken to address significant findings and recommendations. d. Communications from regulatory agencies, government representatives or others concerning possible noncompliance, deficiencies in internal control or other matters that might concern the objectives of the audit. e. Related party relationships and transactions. f. Results of our internal assessment of business risks and risks related to financial reporting, compliance and fraud. 2. We acknowledge our responsibility for compliance with requirements related to confidentiality of certain information, and have notified you whenever records or data containing information subject to any confidentiality requirements were made available. 24 3. We acknowledge our responsibility for compliance with applicable laws, regulations, contracts and grant agreements. 4. We have identified and disclosed all laws, regulations, contracts and grant agreements that could have a direct and material effect on the determination of financial statement amounts, including legal and contractual provisions for reporting specific activities in separate funds. 5. We have complied with all material aspects of laws, regulations, contracts and grant agreements. 6. We acknowledge our responsibility for establishing and maintaining effective internal controls over compliance with applicable laws and regulations and safeguarding of public resources, including controls to prevent and detect fraud. 7. We have established adequate procedures and controls to provide reasonable assurance of safeguarding public resources and compliance with applicable laws and regulations. 8. We have no knowledge of any loss of public funds or assets or other illegal activity, or any allegations of fraud or suspected fraud involving management or employees. 9. In accordance with RCW 43.09.200, all transactions have been properly recorded in the financial records, notwithstanding immaterial uncorrected items referenced below. Additional representations related to the financial statements: 10. We acknowledge our responsibility for fair presentation of the financial statements and believe financial statements are fairly presented in accordance with the Budgeting, Accounting and Reporting Standards Manual (BARS Manual), which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. 11. We acknowledge our responsibility for establishing and maintaining effective internal control over financial reporting. 12. The financial statements properly classify all funds and activities. 13. Revenues are appropriately classified by fund and account in accordance with the BARS Manual. 14. Expenses are appropriately classified by fund and account, and allocations have been made on a reasonable basis. 15. Ending cash and investments are properly classified as nonspendable, restricted, committed, assigned, and unassigned. 16. Significant assumptions we used in making accounting estimates are reasonable. W, 17. The following have been properly classified, reported and disclosed in the financial statements. as applicable: a. Interfund, internal, and intra -entity activity and balances. b. Related -party transactions, including sales, purchases, loans, transfers, leasing arrangements, and guarantees, and amounts receivable from or payable to related parties. c. Joint ventures and other related organizations. d. Guarantees under which the government is contingently liable. e. All events occurring subsequent to the fiscal year end through the date of this letter that would require adjustment to, or disclosure in, the financial statements. f. Effects of all known actual or possible litigation, claims, assessments, violations of laws, regulations, contracts or grant agreements and other loss contingencies. 18. We have accurately disclosed to you all known actual or possible pending or threatened litigation, claims or assessments whose effects should be considered when preparing the financial statements. We have also accurately disclosed to you the nature and extent of our consultation with outside attorneys concerning litigation, claims and assessments. 19. We acknowledge our responsibility to include all necessary and applicable disclosures required by the BARS Manual, including: a. Description of the basis of accounting, summary of significant accounting policies and how this differs from Generally Accepted Accounting Principles (GAAP). b. Disclosures similar to those required by GAAP to the extent they are applicable to items reported in the financial statements. c. Any additional disclosures beyond those specifically required by the BARS Manual that may be necessary for the statements to be fairly presented. 20. We acknowledge our responsibility for reporting supplementary information (the Schedule of Liabilities) in accordance with applicable requirements and believe supplementary information is fairly presented, in both form and content in accordance with those requirements. 21. We have disclosed to you all significant changes to the methods of measurement and presentation of supplementary information, reasons for any changes and all significant assumptions or interpretations underlying the measurement or presentation. 22. We believe the effects of uncorrected financial statement misstatements summarized in the schedule of uncorrected items provided to us by the auditor are not material, both individually and in the aggregate, to the financial statements taken as a whole. 23. We acknowledge our responsibility not to publish any document containing the audit report with any change in the financial statements, supplementary and other information W. referenced in the auditor's report. We will contact the auditor if we have any needs for publishing the audit report with different content included. Connie Anderson Ron Logghe Director of Finance and Technology Services Finance Manager 27