Loading...
HomeMy WebLinkAboutLEPFA Lansing Entertainment and Public facilities Authority Audit 2014 SAS Ltr 6-30-14 (Final) Re h m a n n ' Rebmann Robson 675 Robinson Rd. Jackson,MI 49203 Ph: 517.787.6503 Fx: 517.788.8111 rehmann.com INDEPENDENT AUDITORS' COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE December 17, 2014 The Honorable Mayor, Members of the City Council and Members of the Board of Commissioners of the Lansing Entertainment and Public Facilities Authority Lansing, Michigan We have audited the financial statements of the business-type activities and each major fund of the Lansing Entertainment and Public Facilities Authority (the "Authority") as of and for the year ended June 30, 2014, and have issued our report thereon dated December 17, 2014. Professional standards require that we advise you of the following matters relating to our audit. Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter dated July 10, 2014, our responsibility, as described by professional standards, is to form and express opinions about whether the financial statements that have been prepared by management with your oversight are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of the Authority solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. We have provided our findings regarding internal control over financial reporting and compliance noted during our audit in a separate letter to you dated December 17, 2014. In addition, we noted certain other matters which are included in Attachment A to this letter. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our engagement letter and in our meeting about planning matters on October 20, 2014. Rebmann is an independent member of Nexia International. CPAs&Consultants Wealth Advisors Corporate Investigators INTERNATIONAL Page 2 Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, and our firm has complied with all relevant ethical requirements regarding independence. Qualitative Aspects of the Authority's Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the Authority is included in Note 1 to the financial statements. There have been no initial selections of accounting policies and no changes in significant accounting policies or their application during the year. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management's current judgments. The most sensitive accounting estimates affecting the financial statements were: ■ Management's estimate of the useful lives of depreciable capital assets is based on the length of time it is believed that those assets will provide some economic benefit in the future. ■ Management's estimate of the accrued compensated absences is based on current hourly rates and policies regarding payment of sick and vacation banks. ■ Management's estimate of the allowance for uncollectible receivable balances is based on past experience and future expectation for collection of various account balances. We evaluated the key factors and assumptions used to develop these estimates and determined that they are reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units. Significant Difficulties Encountered During the Audit We encountered no significant difficulties in dealing with management relating to the performance of the audit. Page 3 Uncorrected and Corrected Misstatements For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. We did not identify any misstatements. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the Authority's financial statements or the auditors' report. No such disagreements arose during the course of the audit. Representations Requested from Management We have requested certain written representations from management, which are included in Attachment C to this letter. Management's Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Other Significant Matters, Findings, or Issues In the normal course of our professional association with the Authority, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the Authority's auditors. Upcoming Changes in Accounting Standards Generally accepted accounting principles (GAAP) are continually changing in order to promote the usability and enhance the applicability of information included in external financial reporting. While it would not be practical to include an in-depth discussion of every upcoming change in professional standards, Attachment B to this letter contains a brief overview of recent pronouncements of the Governmental Accounting Standards Board (GASB) and their related effective dates. Management is responsible for reviewing these standards, determining their applicability, and implementing them in future accounting periods. This information is intended solely for the use of the governing body and management of the Lansing Entertainment and Public Facilities Authority and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, Lansing Entertainment and Public Facilities Authority Attachment A - Comments and Recommendations For the June 30, 2014 Audit During our audit, we became aware of certain other matters that are opportunities for strengthening internal control and/or improving operating efficiency. This memorandum summarizes our comments and recommendations regarding those matters. Our consideration of the Authority's internal control over financial reporting is described in our report, dated December 17, 2014, issued in accordance with Government Auditing Standards. This memorandum does not affect that report or our report dated December 17, 2014, on the financial statements of the Authority. Other Matters Journal entry review process. Management is responsible for establishing and maintaining effective internal controls in order to safeguard the assets of the Authority. A key element of the internal controls over manual journal entries is the review of each journal entry by a knowledgeable individual other than the preparer. The Authority does not currently have a process in place to provide for this independent review. We recommend that management develop procedures to ensure that this review takes place for all transactions recorded using general journal entries. Bank reconciliations. In our review of the bank reconciliations, we noted that while the Authority has completed the bank reconciliation on a timely basis, there is no review by an individual other than the preparer. To strengthen internal controls over cash, we recommend the Authority implement procedures to have a review completed by someone other than the preparer and that the review is noted on the bank reconciliations by including the date and the signature of the reviewer. Check history report. Management is responsible for establishing and maintaining effective internal controls within the Authority. A key element of the internal controls over disbursements is the review of the check history report by a knowledgeable individual other than the preparer. The Authority does not currently have a process in place to provide for this independent review. We recommend that management develop procedures to ensure that this review takes place for all check history reports. MENEM Al Lansing Entertainment and Public Facilities Authority Attachment B - Upcoming Changes in Accounting Standards / Regulations For the June 30, 2014 Audit The following pronouncements of the Governmental Accounting Standards Board (GASB) have been released recently and may be applicable to the Authority in the near future. We encourage management to review the following information and determine which standard(s) may be applicable to the Authority. For the complete text of these and other GASB standards, visit www.gasb.org and click on the "Standards Et Guidance" tab. If you have questions regarding the applicability, timing, or implementation approach for any of these standards, please contact your audit team. GASB 68 ■ Accounting and Financial Reporting for Pensions Effective 0611512015 (your FY 2015) This standard establishes new requirements for governments to report a "net pension liability" for the unfunded portion of its pension plan. Governments that maintain their own pension plans (either single employer or agent multiple-employer) will report a liability for the difference between the total pension Liability calculated and the amount held in the pension trust fund. Governments that participate in a cost sharing plan will report a liability for their "proportionate share" of the net pension liability of the entire system. Historically, governments have only been required to report a net pension obligation to the extent that they have not met the annual required contribution (ARC) in any given year. Upon implementation of this standard, governments will be required to report a net pension liability based on the current funded status of their pension plans. This liability would be limited to the government-wide financial statements and proprietary funds. Changes in this liability from year to year will largely be reflected on the income statement, though certain amounts will be deferred and amortized over varying periods. GASB 68 also requires more extensive note disclosures and required supplementary information, including 10 years of historical information. The methods used to determine the discount rate (the assumed rate of return on plan assets held in trust) are mandated and must be disclosed, along with what the impact would be on the net pension liability if that rate changed by 1% in either direction. Other new disclosure requirements include details of the changes in the components of the net pension liability, comparisons of actual employer contributions to actuarially determined contributions, and ratios to put the net pension liability in context. For single-employer and agent multiple-employer plans, the information for these statements will come from the annual actuarial valuation. For cost sharing plans, this information will be derived from the financial reports of the plan itself, multiplied by the government's proportionate share of plan. GASB 67 and 68 are only applicable to pension plans. However, the GASB has announced its intent to issue similar standards for other postemployment benefits (e.g., retiree healthcare) on a two year delay from these standards. 131 Lansing Entertainment and Public Facilities Authority Attachment B - Upcoming Changes in Accounting Standards / Regulations For the June 30, 2014 Audit GASB 69 ■ Government Combinations and Disposals of Government Operations Effective 12/15/2014 (your FY 2015) This standard provides detailed requirements for the accounting and disclosure of various types of government combinations, such as mergers, acquisitions, and transfers of operations. The guidance available previously was limited to nongovernmental entities, and therefore did not provide practical examples for situations common in government-specific combinations and disposals. The accounting and disclosure requirements for these events vary based on whether a significant payment is made, the continuation or termination of services, and the legal structure of the new or continuing entity. Given the infrequent nature of these types of events, we do not expect this standard to have any impact on the Authority at this time. GASB 71 ■ Pension Transition for Contributions Made Subsequent to the Measurement Date Effective with the Implementation of GASB 68 This standard is an amendment to GASB 68, and seeks to clarify certain implementation issues related to amounts that are deferred and amortized at the time GASB 68 is first adopted. It applies to situations in which the measurement date of an actuarial valuation differs from the government's fiscal year. 2 CFR 200 ■ Uniform Guidance for Federal Awards Cost Principles Effective 1212612014; Single Audit Requirements Effective 1212612015 (your FY 2016) The Office of Management and Budget (OMB) has consolidated seven separate circulars (including administrative requirements, cost principles, and audit requirements) into a single federal regulation. The new Uniform Guidance covers all aspects of federal grants from pre-award through the single audit. While much of the guidance was simply reorganized and recodified, there were also several substantive changes to the single audit thresholds. A single audit will now only be required if total expenditures of federal awards exceed $750,000 (up from $500,000). The OMB has indicated that further changes to the single audit will be announced in 2015. In addition, the Uniform Guidance now explicitly requires grant recipients to have sound internal controls that are consistent with the COSO framework and documented procedures for grant administration. Rehmann is available to assist grant recipients in developing/documenting these policies and procedures in compliance with the new requirements. MENEM B2 Lansing Entertainment and Public Facilities Authority Attachment C - Management Representations For the June 30, 2014 Audit Following are the written representations that we requested from management. C1 December 17, 2014 Rehmann Robson 675 Robinson Road Jackson, MI49203 This representation letter is provided in connection with your audit of the financial statements of the business-type activities and each major fund of Lansing Entertainment and Public Facilities Authority, as of and for the year ended June 30, 2014, and the related notes to the financial statements, for the purpose of expressing opinions on whether the basic financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows, where applicable, in conformity with accounting principles generally accepted for governments in the United States of America (U.S. GAAP). Certain representations in this letter are described as being limited to matters that are material. items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. We confirm that, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves as of December 17, 2014: Financial Statements 1. We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter dated July 10, 2014, for the preparation and fair presentation of the financial statements of the various opinion units referred to above in accordance with U.S. GAAP. We have reviewed, approved, and taken responsibility for the financial statements and related notes. 2. We have reviewed and approved the various adjusting journal entries that were proposed by you for recording in our books and records and reflected in the financial statements. 3. We acknowledge our responsibility 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. 4. We acknowledge our responsibility for the design, implementation, and maintenance of internal control to prevent and detect fraud. 5. Significant assumptions used by us in making accounting estimates are reasonable. 6. Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the requirements of U.S. GAAP. For the purposes of this letter, related parties mean members of the governing body; board members; administrative officials; immediate families of administrative officials, board members, and members of the governing body; and any companies affiliated with or owned by such individuals. 7. All events subsequent to the date of the financial statements and for which U.S. GAAP requires adjustment or disclosure have been adjusted or disclosed. B. The effects of all known actual or possible litigation and claims have been accounted for and disclose` in accordant wi h U. GAAP. Lansing hnteriainment & Public Facilities Authority 333 E.Michigan Avenue,Lansing,MI 48933 Member&2an=& I.lMA Ph.:(517)483-7400 - Fax(517)483.7439 ( laas�dg r n x aT o r IT 4 3 1 , wwwlcpfa.com V rl++l+++ Rehmann Robson Page 2 of 3 9. All funds and activities are properly classified. 10. All funds that meet the quantitative criteria in GASB Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments, and GASB Statement No. 37, Basic Financial Statements—and Management's Discussion and Analysis— for State and Local Governments: Omnibus, for presentation as major are identified and presented as such and all other funds that are presented as major are considered important to financial statement users. 11. All components of net position and fund balance classifications have been properly reported. 12. All revenues within the statement of activities have been properly classified as program revenues, general revenues, contributions to term or permanent endowments, or contributions to permanent fund principal. 13. All expenses have been properly classified in or allocated to functions and programs in the statement of activities, and allocations, if any, have been made on a reasonable basis. 14. All interfund and intra-entity transactions and balances have been properly classified and reported. 15. Deposit and investment risks have been properly and fully disclosed. 16. Capital assets, including infrastructure assets, are properly capitalized, reported, and if applicable, depreciated. 17. All required supplementary information is measured and presented within the prescribed guidelines. Information Provided 18. We have provided you with: a. Access to all information, of which we are aware that is relevant to the preparation and fair presentation of the financial statements of the various opinion units referred to above, such as records, documentation, meeting minutes, and other matters; b. Additional information that you have requested from us for the purpose of the audit; and c. Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence. 19. All transactions have been recorded in the accounting records and are reflected in the financial statements. 20. We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud. 21. We have no knowledge of any fraud or suspected fraud that affects the entity and involves: a. Management; b. Employees who have significant roles in internal control; or c. Others where the fraud could have a material effect on the financial statements. 22. We have no knowledge of any allegations of fraud, or suspected fraud, affecting the entity's financial statements communicated by employees, former employees, vendors, regulators, or others. 23. We are not aware of any pending or threatened litigation and claims whose effects should be considered when preparing the financial statements. 24. We have disclosed to you the identity of the entity's related parties and all the related party relationships and transactions of which we are aware. 25. There have been no communications from regulatory agencies concerning noncompliance with or deficiencies in accounting, internal control, or financial reporting practices. 26. The government has no plans or intentions that may materially affect the carrying value or classification of assets and liabilities. Rehmann Robson Page 3 of 3 27. We have disclosed to you all guarantees, whether written or oral, under which the government is contingently liable. 28. We have identified and disclosed to you the laws, regulations, and provisions of contracts and grant agreements that could have a direct and material effect on financial statement amounts, including legal and contractual provisions for reporting specific activities in separate funds. 29. There are no: a. Violations or possible violations of laws or regulations, or provisions of contracts or grant agreements whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency, including applicable budget laws and regulations. b. Unasserted claims or assessments that our lawyer has advised are probable of assertion and must be disclosed in accordance with GASB-62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AlCPA Pronouncements. c. Other liabilities or gain or loss contingencies that are required to be accrued or disclosed by GASB-62. 30. The government has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any asset or future revenue been pledged as collateral, except as disclosed to you. 31. We have complied with all aspects of grant agreements and other contractual agreements that would have a material effect on the financial statements in the event of noncompliance. 32. We have disclosed to you all significant estimates and material concentrations known to management that are required to be disclosed in accordance with GASB-62. Significant estimates are estimates at the balance sheet date that could change materially within the next year. Concentrations refer to volumes of business, revenues, available sources of supply, or markets or geographic areas for which events could occur that would significantly disrupt normal finances within the next year. Required Supplementary Information 33. With respect to the required supplementary information accompanying the financial statements: a. We acknowledge our responsibility for the presentation of the required supplementary information in accordance with accounting principles generally accepted in the United States of America. b. We believe the required supplementary information, including its form and content, is measured and fairly presented in accordance with accounting principles generally accepted in the United States of America. c. The methods of measurement or presentation have not changed from those used in the prior period. d. We believe the significant assumptions or interpretations underlying the measurement or presentation of the required supplementary information, and the basis for our assumptions and interpretations, are reasonable and appropriate in the circumstances. 14�� /Pvsz�� (Name of Chief Executivo Officer and Title) (Name of Chief Financial Officer and Title)