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HomeMy WebLinkAbout2016 Financial Statements and Federal Single Audit Financial Statements and Federal Single Audit Report City of Port Townsend Jefferson County For theperiod January 1, 2016 through December 31, 2016 Published July 24, 2017 Report No. 1019516 Office of the Washington State Auditor Pat McCarthy July 24, 2017 Mayor and City Council City of Port Townsend Port Townsend, Washington Report onFinancial Statements and Federal Single Audit compliance with federal laws and regulations. . Sincerely, Pat McCarthy State Auditor Olympia, WA Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370Pat.McCarthy@sao.wa.gov TABLE OF CONTENTS Schedule Of Findings And Questioned Costs.................................................................................4 Compliance And Other Matters Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards.......................................................................6 And Report On Internal Control Over Compliance In Accordance With The Uniform Guidance....................9 Financial Statements..............................................................12 Financial Section...........................................................................................................................16 About The StateA................................................................................................. ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 3 SCHEDULE OF FINDINGSAND QUESTIONED COSTS City of Port Townsend Jefferson County January 1, 2016 through December 31, 2016 SECTION I The results of our audit of the City of Port Townsend are summarized below in accordance with Title 2 U.S. Code of Federal Regulations(CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards(Uniform Guidance). Financial Statements We issued an unmodifiedopinion on the fair presentation of the financial statements in accordance with its regulatory basis of accounting. Separately, we issued an adverse opinion on the fair presentation of all funds with regard to accounting principles generally accepted in the United States of America (GAAP) because the financial statements are prepared using a basis of accounting other than GAAP. Internal Control over Financial Reporting: Significant Deficiencies: We reported no deficiencies in the design or operation of internal control over financial reportingthat we consider to be significant deficiencies. Material Weaknesses:We identified no deficiencies that weconsider to be material weaknesses. We noted no instances of noncompliance that were material to the financial statements of the City. Federal Awards Internal Control over Major Programs: Significant Deficiencies:We reported no deficiencies in the design or operation of internal control over major federal programs that we consider to be significant deficiencies. Material Weaknesses:We identified no deficiencies that we consider to be material weaknesses. ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 4 major federal program. We reported no findings that are required to be disclosed in accordance with 2 CFR 200.516(a). Identification of Major Federal Programs: The following program was selected as a major program in our audit of compliance in accordance with the Uniform Guidance. CFDA No.Program or Cluster Title 66.468Capitalization Grants for Drinking Water State Revolving Funds The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by the Uniform Guidance, was $750,000. The City did not qualify as a low-risk auditee under the Uniform Guidance. SECTION II FINANCIAL STATEMENT FINDINGS None reported. SECTION III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None reported. ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 5 S REPORT ON INTERNALCONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMEDIN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS City of Port Townsend Jefferson County January 1, 2016 through December 31, 2016 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, Jefferson County,Washington, as of and for the year ended December 31, 2016, and the re financial statements, and have issued our report thereon dated July 17, 2017. 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 Cityusing accounting 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. INTERNAL CONTROL OVER FINANCIAL REPORTING internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose ofexpressing our opinion on the financial internal control. ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 6 Adeficiency in internal controlexists 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 deficiencyis 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 in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. 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 testsdisclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. PURPOSE OF THIS REPORT 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 s an integral part of an audit performed in accordance with Government Auditing Standards compliance. Accordingly, this communication is notsuitable for any other purpose. However, ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 7 this 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 July 17, 2017 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 8 INDEPENDENT COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM ANDREPORTON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE UNIFORM GUIDANCE City of Port Townsend Jefferson County January 1, 2016 through December 31, 2016 Mayor and City Council City of Port Townsend Port Townsend, Washington REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM We have auditedthe compliance of theCity of Port Townsend,JeffersonCounty, Washington, with the types of compliance requirements described in the U.S. Officeof Management and Budget (OMB)Compliance Supplementthat could have a direct and material effect on each of theCity federal programs are identified in the accompanyingSchedule of Findings and Questioned Costs. Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awardsapplicable to its federal programs. Responsibility programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; andthe audit requirements ofTitle 2 U.S.Code of Federal RegulationsPart 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards(Uniform Guidance).Those standards and the Uniform Guidancerequire that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 9 s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. Our audit doe compliance. Opinion on Each Major Federal Program In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2016. REPORT ON INTERNAL CONTROL OVER COMPLIANCE Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of complia with the types of requirements that could have a direct and material effect on each major federal program in order to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectivenessof internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. Adeficiency in internal control over complianceexists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weaknessin internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over complianceis a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement ofa federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purposedescribed in the first paragraph of this section and was not designed to identify all deficiencies in internal ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 10 control that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliancethat we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Purpose of this Report The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. However, this 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 July 17, 2017 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 11 S REPORT ON FINANCIAL STATEMENTS City of Port Townsend Jefferson County January 1, 2016 through December 31, 2016 Mayor and City Council City of Port Townsend Port Townsend, Washington REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the City of Port Townsend,Jefferson County, Washington, for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the Cityas listed on page 16. Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of Washington State statutes and the Budgeting, Accounting and Reporting System(BARS) manual prescribed by the State Auditor described in Note1. This includes determining thatthe 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 frommaterial misstatement, whether due to fraud or error. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit inaccordance 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 12 judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City statements 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 Accordingly, we express no such opinion. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our auditopinions. Unmodified Opinion on Regulatory Basis of Accounting (BARS Manual) As described in Note 1, the City of Port Townsendhas prepared these financial statements to meet the financial reporting requirements of Washington State statutes using accounting practices prescribed by the Budgeting, Accounting and Reporting System(BARS) manual. Those accounting practices differ fromaccounting 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 financial statements referred to above present fairly, in all material respects, the financial position and results of operations of the City of Port Townsend, for the year ended December 31, 2016, on the basis of accounting described in Note 1. Basis for Adverse Opinion on U.S. GAAP Auditing standards issued by the AmericanInstitute 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. The effects on the financial statements of the variances between GAAP and the accounting practices the City used, as described in Note 1, although not reasonably determinable, are presumed to be material. As a result, we are required to issue an adverse opinion on whether the financial statements are presented fairly, in all material respects, in accordance with GAAP. ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 13 Adverse Opinion on U.S. GAAP 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, 2016, or the changes in financial position or cash flows for the year then ended, due to the significance of the matter discussed in thea Other Matters Supplementary and Other Information Our audit was performed for the purpose of forming an opinionon the financial statements taken as a whole. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations(CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards(Uniform Guidance).The accompanying Schedule of Liabilitiesis also 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 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 taken as a whole. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards,we have also issued our report dated July our 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 internal control over financial reporting or on compliance. That report ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 14 isan integral part of an audit performed in accordance with Government Auditing Standardsin over financial reporting and compliance. Pat McCarthy State Auditor Olympia, WA July 17, 2017 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 15 FINANCIAL SECTION City of Port Townsend Jefferson County January 1, 2016 through December 31, 2016 FINANCIAL STATEMENTS Fund Resources and Uses Arising from Cash Transactions 2016 Fiduciary Fund Resources and Uses Arising from Cash Transactions 2016 Notes to Financial Statements 2016 SUPPLEMENTARY AND OTHER INFORMATION Schedule of Liabilities 2016 Schedule of Expenditures of Federal Awards 2016 Notes to the Schedule of Expenditures of Federal Awards 2016 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 16 The accompanying notes are an integral part of this statement. ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 17 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 18 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 19 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 20 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 21 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 22 The accompanying notes are an integral part of this statement. ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 23 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 24 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 25 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 26 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 27 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 28 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 29 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 30 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 31 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 32 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 33 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 34 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 35 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 36 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 37 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 38 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 39 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 40 The accompanying notes are an integral part of this schedule. ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 41 The accompanying notes are an integral part of this schedule. ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 42 ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 43 ABOUT THE STATE A The State Auditor's Office is established in the state's Constitution and is part of the executive branch of state government. The State Auditor is elected by the citizens of Washington and serves four-year terms. We work with our audit clients and citizens to achieve our vision of government that works for citizens, by helping governments work better, cost less, deliver higher value, and earn greater public trust. In fulfilling our mission to hold state and local governments accountable for the use of public resources, we also hold ourselves accountable by continually improving our audit quality and operational efficiency and developing highly engaged and committed employees. As an elected agency, the State Auditor's Office has the independence necessary to objectively performaudits and investigations. Our audits are designed to comply with professional standards as well as to satisfy the requirements of federal, state, and local laws. Our audits look at financial information and compliance with state, federal and local laws on the part of all local governments, including schools, and all state agencies, including institutions of higher education. In addition, we conduct performance audits of state agencies and local governments as well as fraud, state whistleblowerand citizen hotlineinvestigations. The results of our work are widely distributed through a variety of reports, which are available on our websiteand through our free, electronic subscriptionservice. We take our role as partners in accountability seriously, and provide training and technical assistance to governments, and have an extensive quality assurance program. Public Records requestsPublicRecords@sao.wa.gov Main telephone(360)902-0370 Toll-free Citizen Hotline(866)902-3900 Websitewww.sao.wa.gov ____________________________________________________________________________________________________________________ Washington State Auditor's OfficePage 44