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HomeMy WebLinkAboutAgenda Packet - Finance & Human Resources Committee - 07/09/2019F IN A N C E A N D HUMA N RES O URC ES C O MMIT T EE J uly 9, 2019 - 3:30 PM 31111 Greenspot Road, Highland, C A 92346 AGE N D A C A LL TO O RD ER PLED G E O F A LLEG IA N C E PUBLIC C O MMEN T S N E W B U SI N E SS 1.Review Engagement Letter and Planning Document from CliftonLarsonAllen, LLP for Preparation of the District's FY 2018-19 Audit 2.Review Delinquent Water and Wastewater Charges that will be sent to the C ounty of San Bernardino's Tax Roll for 2019-20 AD J O U RN P LEAS E NO T E: P urs uant to G overnment C ode S ec tion 54954.2(a), any reques t for a dis ability-related modification or ac commodation, including auxiliary aids or services, that is s ought in order to partic ipate in the above- agendized public meeting should be direc ted to the District C lerk at (909) 885-4900 at least 72 hours prior to said meeting. S TAF F R E P ORT Agenda Item #2. Meeting Date: July 9, 2019 Dis c ussion Item To: F I N ANC E AND HUMAN R ES O UR C ES C O MMI T T E E F rom: C hief F inancial O fficer Subject: R eview Engagement Letter and P lanning Do cument from C lifto nLars o nAllen, LLP for P reparatio n of the Dis tric t's F Y 2018-19 Audit R E C O MME N D AT IO N: S taff rec o mmend s that the F inance and Human R es ources C o mmittee (C ommittee) review the Engagement Letter and planning d o c ument fro m C liftonLarsonAllen, LLP (C L A) for the p rep aration o f the Aud it o f F inanc ials fo r EVW D fo r the year end ed June 30, 2019. B AC KGR O UN D / AN ALYS IS : S taff has plac ed this item o n the C o mmittee meeting agenda in order to reintroduce the p rinc ip als from the Dis tric t’s aud it firm. In ad d ition, as aud iting is a review o f managements’ ac tivities, b es t p rac tic es d ictate that a line o f c o mmunic ation b e estab lished between the Dis tric t audito rs and G overning Bo ard . T herefo re, attac hed fo r the C o mmittee to review is the Engagement Letter from C LA to provid e aud iting s ervic es to E VW D fo r the fisc al year ended June 30, 2019. T he Engagement Letter exp lains what the o b jectives o f these s ervic es will b e and desc rib e the proc ed ures that will be used to p erfo rm their wo rk. Als o attac hed is the firm’s ‘O verall P lan to Acc o mp lish the Aud it’ doc ument whic h p ro vides ins ight as to what audit s ervic es will be p ro vided during the aud it, in ac c o rd anc e with, generally acc ep ted ac counting princ ip les (G AAP ). Auditing S tand ard s req uire fo r thes e doc uments to be c o mmunic ated to tho s e charged with G o vernance and C L A is pres ent to answer any q ues tions . AG E N C Y G O ALS AN D OB J E C T IVE S : G o al and O bjec tives I I - Maintain a C ommitment to S us tainab ility, Transparenc y, and Ac c o untability a) P rac tice Trans parent and Ac countab le F is cal Management R E VIE W B Y O T HE R S : T his agenda item has been reviewed by the F inanc e Dep artment. F IS C AL IMPAC T T here is no fis cal impac t as s o c iated with this agend a item ATTACH M E N TS: Description Type E VW D Engagement Letter Backup Material Auditing P lan Backup Material EAST VALLEY WATER DISTRICT OVERALL PLAN TO ACCOMPLISH THE AUDIT June 30, 2019 Presented by CliftonLarsonAllen LLP Renee Graves, CPA, CGFM Leslie Ward, CPA Daphne Liu, CPA July 9, 2019 Finance Committee East Valley Water District Highland, California AUDIT SERVICES/OBJECTIVES Our audit will be made 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 audit will include such tests of the accounting records and other auditing procedures as we consider necessary to enable us to express our professional opinion whether the financial statements are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. The audit of the financial statements does not relieve management or those charged with governance of their responsibilities. An essential feature of our audit is to gain an understanding of your system of internal controls upon which the scope and extent of our audit tests will be determined. Such an audit is not intended to be sufficiently conclusive to assure the discovery of errors, fraudulent financial reporting, misappropriation of assets, or violations of laws or governmental regulations, although their discovery may result. However, we feel that it offers an acceptable balance between conclusive reliability and reasonable audit costs. It provides for inquiries and selective tests of your operating procedures, including those designed to safeguard property and the accuracy and timeliness of cash disbursements. It gives reasonable assurance that the overall financial position and the results of operations are fairly presented on the basis indicated. It should be recognized, however, that it gives less assurance as to the accuracy of the individual items appearing in the financial statements since the tests are directed toward forming an opinion on the financial statements taken as a whole. Dr a f t - P r e l i m i n a r y Fo r D i s c u s s i o n P u r p o s e O n l y Su b j e c t t o C h a n g e No t t o b e R e p r o d u c e d Page 1 of 6 EAST VALLEY WATER DISTRICT OVERALL PLAN TO ACCOMPLISH THE AUDIT For the year Ended June 30, 2019 2018-2019 AUDIT SERVICES We will audit the Comprehensive Annual Financial Report (CAFR) that includes the statement of net position as of June 30, 2019 and the related statements of revenues, expenses and changes in net position and cash flows for the year ended June 30, 2019. The financial statements referred to above will include all supplementary schedules required by generally accepted accounting standards. We have not been engaged to report on any other statements, reports or forms that require an auditors’ opinion. With respect to the required supplementary information (RSI) accompanying the financial statements, we will make certain inquiries of management about the methods of preparing the RSI, including whether the RSI has been measured and presented in accordance with prescribed guidelines, whether the methods of measurement and preparation have been changed from the prior period and the reasons for any such changes, and whether there were any significant assumptions or interpretations underlying the measurement or presentation of the RSI. We will compare the RSI for consistency with management’s responses to the foregoing inquiries, the basic financial statements, and other knowledge obtained during the audit of the basic financial statements. Because these limited procedures do not provide sufficient evidence, we will not express an opinion or provide any assurance on the RSI. Management will prepare the financial statements, including footnotes, supplementary schedules, and the statistical section in compliance with the reporting format required by Governmental Accounting Standards Board (GASB). We will assist with the financial reporting and disclosures for GASB No. 68 Accounting and Financial Reporting for Pensions—an amendment of GASB Statement No. 27 and GASB No. 75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (OPEB). The audit referred to above also includes reporting on internal control related to the financial statements and compliance with the provisions of applicable laws, regulations, contracts, agreements, and grants, noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. COMMUNICATIONS ARISING FROM THE AUDIT We will communicate to the Finance Committee certain other matters related to the conduct of our audit, in accordance with, generally accepted auditing standards on The Auditor’s Communication with Those Charged with Governance, this communication will include:  The Auditors’ Responsibilities with Regard to the Financial Statement Audit  Planned Scope and Timing of the Audit  Significant Findings from the Audit:  Qualitative aspects of significant accounting practices of the District such as accounting policies, accounting estimates and financial statement disclosures  Significant difficulties, if any, encountered in performing the audit  Uncorrected misstatements Dr a f t - P r e l i m i n a r y Fo r D i s c u s s i o n P u r p o s e O n l y Su b j e c t t o C h a n g e No t t o b e R e p r o d u c e d Page 2 of 6 EAST VALLEY WATER DISTRICT OVERALL PLAN TO ACCOMPLISH THE AUDIT For the year Ended June 30, 2019  Material, corrected misstatements as a result of audit procedures  Disagreements with management  Representations the auditor has requested from management  Management’s consultations with other accountants  Significant issues such as business conditions affecting the District or the application of accounting principles and auditing standards – especially if discussed prior to our retention as the auditor  Other findings or issues that we believe to be significant and relevant to those responsible for the financial reporting process  Independence – communication of any non-audit services performed or expected to be performed As part of the required communications, we will communicate to the extent that they come to our attention, material errors, fraud or other illegal acts that are clearly not inconsequential, and any control deficiencies. Any internal control or compliance related matters that are required to be communicated under professional standards or Federal and state agencies will be included in our audit report. We may also have other comments for management on matters we have observed and possible ways to improve the efficiency of your operations, or other recommendations concerning the internal control structure. With respect to these other communications, it is our normal practice to discuss comments, if appropriate, with the level of management responsible for the matters prior to their communication to senior management and/or the Finance Committee. Before our reports are issued, draft copies are reviewed with management and the Finance Committee. These reports are also subjected to firm technical review procedures by an independent member of the firm. ORGANIZATION AND STAFF Our staffing has been planned to obtain the optimum blend of efficiency and quality. The principal, director and in-charge with significant industry knowledge are assigned to your engagement. The senior in-charge will have responsibility for coordinating all of the audit areas on the 2018-2019 engagement. Renee Graves, CPA, CGFM Principal: renee.graves@claconnect.com; Direct (626) 387-8213 Leslie Ward, CPA, Director: leslie.ward@claconnect.com; Direct (626) 387-8267 Daphne Liu, CPA, Director: daphne.liu@claconnect.com; Direct (626) 387-8244 Dr a f t - P r e l i m i n a r y Fo r D i s c u s s i o n P u r p o s e O n l y Su b j e c t t o C h a n g e No t t o b e R e p r o d u c e d Page 3 of 6 EAST VALLEY WATER DISTRICT OVERALL PLAN TO ACCOMPLISH THE AUDIT For the year Ended June 30, 2019 TIMING OF THE AUDIT Our audit of the financial statements will be performed in three phases: (1) planning, (2) test of controls and risk assessment, and (3) account balance procedures. We will maintain regular contact with appropriate members of management to ensure all due dates will be met. Our audit work will be scheduled to meet the following timetable: Audit Planning April - May Additional planning and risk assessment, including testing of internal controls Week of April 22, 2019 Pre-audit meeting with management April 24, 2019 Pre-audit Finance Committee presentation July 9, 2019 Commencement of year-end work Week of September 2, 2019 Meet with management to review draft of financial statements September 6, 2019 Present final draft report to Finance Committee October 1, 2019 Finalize audit report – signed and delivered October 2, 2019 Present final signed report to Board of Directors October 9, 2019 ITEMS OF CONSIDERATION FOR THE 2018-2019 AUDIT Litigation Review In consideration of contingencies, either required to be accrued or disclosed, we will discuss these issues with management and will circulate letters of confirmation to your attorneys handling any significant legal matters that may result in contingent liabilities. Consideration of Fraud in a Financial Statement Audit In fulfilling our responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud, the auditor gathers information necessary to identify risks of material misstatement due to fraud. This is accomplished through inquiry with management and others within the entity, including governance. In addition, we will evaluate the entity’s programs and controls in place to mitigate risks of fraud and how the organization’s business practices and ethical standards are communicated to employees. Dr a f t - P r e l i m i n a r y Fo r D i s c u s s i o n P u r p o s e O n l y Su b j e c t t o C h a n g e No t t o b e R e p r o d u c e d Page 4 of 6 EAST VALLEY WATER DISTRICT OVERALL PLAN TO ACCOMPLISH THE AUDIT For the year Ended June 30, 2019 NEW GOVERNMENTAL ACCOUNTING STANDARDS As deemed necessary, the Governmental Accounting Standard Board (GASB) will issue new accounting standards that may impact financial presentations. It is management’s responsibility to implement the appropriate GASB Statement as they pertain to District operations. We can provide assistance to the District with implementation of a new standard under a separate agreement. Statement No. 83 – Certain Asset Retirement Obligations Issued in November 2016, this statement addresses accounting and financial reporting for certain asset retirement obligations (ARO). An ARO is a legally enforceable liability associated with the retirement of tangible capital assets. The statement establishes criteria for determining the timing and pattern of recognition of a liability and a corresponding deferred outflow of resources. The statement is effective for the fiscal year 2018-19. Statement No. 88 – Certain Disclosures Related to Debt, including Direct Borrowings and Direct Replacements The statement defines debt for purposes of disclosure in the notes to the financial statements. The statement requires additional disclosures related to debt obligations, including direct borrowings and direct placements. Amounts of unused lines of credit, assets pledged as collateral for debt and terms specified in debt agreements related to significant 1) events or default with finance-related consequences; 2) termination events with finance-related consequences and 3) subjective acceleration clauses are also required to be disclosed. The statement is effective for the fiscal year 2018-19. NEW GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENTS, NOT YET EFFECTIVE Statement No. 84 – Fiduciary Activities This statement was issued In January 2017 to improve guidance regarding the recognition of fiduciary activities for accounting and financial reporting purposes by establishing criteria for identifying fiduciary activities of all state and local governments. The statement is effective for the fiscal year 2019-20. Statement No. 87 – Leases This statement was issued in June 2017 to address accounting and financial reporting for leases by governments. This statement requires recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this statement, lessee is required to recognize a lease liability and Dr a f t - P r e l i m i n a r y Fo r D i s c u s s i o n P u r p o s e O n l y Su b j e c t t o C h a n g e No t t o b e R e p r o d u c e d Page 5 of 6 EAST VALLEY WATER DISTRICT OVERALL PLAN TO ACCOMPLISH THE AUDIT For the year Ended June 30, 2019 an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. The statement is effective for the fiscal year 2020-21. Statement No. 89 – Accounting for Interest Costs Incurred before the End of a Construction Period This statement was issued in June 2018 and requires that interest costs incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. As a result, interest costs incurred before the end of a construction period will not be included in the historical costs of a capital asset reported in a business-type activity or enterprise fund. This statement supersedes paragraphs 5-22 of Statement No. 62 and is effective for the fiscal year 2020-21. Statement No. 90 – Majority Equity Interests – an amendment of GASB Statements No. 14 and No. 61 The statement modifies previous guidance for reporting a majority equity interest in a legally separate organization and provides guidance for reporting a component unit if 100 percent equity interest is acquired in that component unit. The statement is effective for the fiscal year 2019-20. Future GASB Statements In addition, to the GASB Statements noted above, there are several exposure drafts with implementation dates in future years. We will provide ongoing communication to the District as new standards are released. Dr a f t - P r e l i m i n a r y Fo r D i s c u s s i o n P u r p o s e O n l y Su b j e c t t o C h a n g e No t t o b e R e p r o d u c e d Page 6 of 6 S TAF F R E P ORT Agenda Item #3. Meeting Date: July 9, 2019 Dis c ussion Item To: F I N ANC E AND HUMAN R ES O UR C ES C O MMI T T E E F rom: C hief F inancial O fficer Subject: R eview Delinq uent Water and Was tewater C harges that will be s ent to the C ounty of S an Bernardino's Tax R oll for 2019-20 R E C O MME N D AT IO N: S taff recommends that the F inanc e and Human R esourc es C o mmittee (C o mmittee) review R es olutio n 2019.10 autho rizing the p lac ement of d elinquent, unp aid water and was tewater charges o n the C ounty o f S an Bernardino’s tax roll for 2019-20. B AC KGR O UN D / AN ALYS IS : C alifo rnia Water C ode S ection 31701.5 autho rizes the Dis tric t to plac e liens on real property fo r delinq uent water and was tewater c harges, and to roll unpaid delinquent charge amounts and unpaid lien amounts o ver to the S an Bernard ino C ounty pro p erty tax b ill. T his authority gives the Dis tric t a metho d to rec o ver unp aid charges and fees related to utility s ervic es rendered. Delinquent charges that are sub ject to b e rolled onto the p ro p erty tax bill includ e, but are not limited to, water cons umption and related charges , wastewater c o llectio n and treatment servic es , late fees , interes t, and p enalties . Every July, the Dis tric t determines which liens have no t been paid and p repares the appropriate materials to s end to the S an Bernard ino C o unty for rec o very of d elinquent s ervic e c harges to the p ro perty o wner ’s tax bill. In d o ing s o, the Distric t greatly enhances its ab ility to rec over unp aid charges in the upc o ming fis cal year. AG E N C Y G O ALS AN D OB J E C T IVE S : G o al and O bjec tives I I - Maintain a C ommitment to S us tainab ility, Transparenc y, and Ac c o untability a) P rac tice Trans parent and Ac countab le F is cal Management R E VIE W B Y O T HE R S : T his agenda item has been reviewed by the F inanc e Dep artment. F IS C AL IMPAC T C ollec tion o f $30,303.74 in delinquent water and was tewater c harges. ATTACH M E N TS: Description Type Resolution 2019.10 Resolutio n Letter List o f Delinquent Water and Wastewater Acco unts Backup Material East Valley Water District Resolution 2019.10 Page 1 of 2 RESOLUTION 2019.10 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT, SAN BERNARDINO COUNTY, STATE OF CALIFORNIA, ADDING DELINQUENT NON-PAID CHARGES TO ANNUAL TAXES LEVIED UPON THE PROPERTY FOR WHICH THE CHARGES ARE DELINQUENT AND UNPAID WHEREAS, the Board of Directors of the East Valley Water District (the “District”) has prepared a report and statement of those delinquent non-paid charges for water and other services within the District which were delinquent and unpaid for sixty days or more on July 1, 2019; and WHEREAS, the Board of Directors of the District has decided that said delinquent and unpaid charges are to be included in the property tax levied on said property pursuant to California Water Code Sections 31701 (e) and 31701.5 et seq.; and THEREFORE, the Board of Directors of the District does hereby resolve, determine and order as follows: Section 1. That the report of the District’s delinquent and unpaid charges for water and other services within the District which remain unpaid and delinquent for sixty days or more on July 1, 2019 is hereby adopted and approved by said Board. Section 2. That the unpaid and delinquent charges listed in said report for each parcel of property are fixed at the amount listed in said report. Section 3. That the Secretary shall file with the County Auditor of the County of San Bernardino and the Board of Supervisors of the County of San Bernardino, in the time and manner specified by the County Auditor and Board of Supervisors, a copy of such written report with a statement endorsed hereon over the signature of the Secretary, that such a report has been finally adopted and approved by the Board of Directors, and that the County Auditor shall enter the amount of such charges against the respective lots of parcels of land as they appear on the current assessment roll. Section 4. That the County Tax Collector shall include the amount of charges on bills for taxes levied against their respective lots and parcels of land and, therefore, the amount of such unpaid and delinquent charges shall be collected at the same time and in the same manner by the same person as, together with and not separately from, the general taxes, if any, for the District or the County of San Bernardino and shall be delinquent at the same time, and thereafter be subject to the same delinquency penalties. East Valley Water District Resolution 2019.10 Page 2 of 2 The foregoing Resolution was duly adopted at a regular meeting of the Board of Directors of the East Valley Water District by motion made, duly seconded, and carried on July 24, 2019. This Resolution shall take effect as of the 24th day of July 2019. ADOPTED this 24th day of July 2019. ROLL CALL: Ayes: Noes: Abstain: Absent: Chris Carrillo Board President July 2 4, 2019 I HEREBY CERTIFY that the foregoing is a full, true and correct copy of Resolution 2019.10 adopted by the Board of Directors of East Valley Water District at its Regular Meeting held July 24, 2019. ATTEST: _____________________________ John Mura Secretary, Board of Directors ACCOUNT NO.APN ORIGINAL AMOUNT 0001-0059-02 0271-342-02-0000 52.41 0001-0213-00 0155-341-11-0000 134.14 0002-0132-15 0271-471-06-0000 158.32 0004-0097-12 1192-081-06-0000 2,305.22 0008-0816-08 1191-421-31-0000 79.40 0015-0249-10 0271-402-26-0000 431.30 0019-1508-05 1191-361-33-0000 235.97 0019-2298-07 1191-351-31-0000 142.28 0020-0105-06 1210-441-04-0000 144.86 0021-0068-05 0155-531-29-0000 207.13 0023-0082-03 0272-232-51-0000 232.79 0025-1887-12 1192-471-27-0000 91.72 0031-0117-08 0285-432-02-0000 58.17 0033-0007-11 0285-532-11-0000 400.86 0034-0009-06 0272-132-20-0000 12,435.63 0034-0030-04 0272-123-32-0000 249.59 0037-0063-05 1192-352-44-0000 69.01 0042-0051-07 0272-271-14-0000 195.71 0042-0127-11 0272-331-01-0000 262.24 0042-0185-08 0155-141-08-0000 279.21 0043-0028-04 0285-313-05-0000 49.14 0043-0052-06 0285-262-02-0000 351.18 0043-0112-05 0285-312-15-0000 325.12 0044-0187-05 0272-212-16-0000 155.96 0052-0063-03 0273-291-07-0000 258.32 0053-0267-09 1191-081-69-0000 265.53 0054-1493-18 1191-451-44-0000 47.05 0054-1537-11 1191-501-68-0000 105.05 0055-1245-01 1210-461-14-0000 1,689.97 0063-0311-09 1191-271-70-0000 113.71 0073-0011-01 0273-131-10-0000 80.67 0073-0135-04 0273-141-49-0000 347.81 0082-0071-22 0278-081-01-0000 278.00 0082-0155-02 0278-252-16-0000 282.29 0083-0006-02 1192-481-48-0000 241.95 0084-0971-06 1191-411-23-0000 93.78 0084-1150-00 1191-411-15-0000 1,723.87 0084-1233-13 1191-361-22-0000 278.86 0084-1585-03 1191-371-48-0000 71.15 The following properties all have recorded liens in the amount of the delinquencies shown and are to be turned over to the Office of the Tax Collector, County of San Bernardino, to be added to the Respective Property Tax Bills *2019-20 County Tax Roll* Page 1 of 2 ACCOUNT NO.APN ORIGINAL AMOUNT The following properties all have recorded liens in the amount of the delinquencies shown and are to be turned over to the Office of the Tax Collector, County of San Bernardino, to be added to the Respective Property Tax Bills *2019-20 County Tax Roll* 0091-2037-09 1191-121-19-0000 756.70 0094-0200-08 0278-296-07-0000 164.71 0103-0113-08 1192-071-42-0000 114.35 0103-0124-12 1192-071-21-0000 278.25 0105-2985-03 1201-451-14-0000 170.01 0111-0082-05 1192-261-19-0000 143.11 0111-0213-08 1192-251-30-0000 683.02 0111-0231-07 1192-251-14-0000 492.81 0111-0267-10 1192-531-39-0000 51.26 0112-0076-02 0279-062-04-0000 105.80 0112-0129-04 0279-063-06-0000 388.49 0113-0271-11 0279-074-12-0000 119.51 0122-1601-08 0288-551-01-0000 202.55 0132-0076-12 0285-851-32-0000 60.50 0132-0156-12 0285-833-05-0000 133.18 0132-0156-14 0285-833-05-0000 58.22 0135-0163-01 0285-861-20-0000 69.23 0140-0061-00 1200-441-02-0000 114.14 0154-2152-03 0273-112-24-0000 179.89 0154-2574-07 0273-202-26-0000 198.29 0154-2696-06 0273-122-52-0000 76.81 0155-0004-05 1192-491-39-0000 48.36 0156-0596-13 1200-411-10-0000 190.52 0161-0088-03 1210-131-13-0000 147.40 0164-0078-07 1210-231-69-0000 129.85 0164-2695-04 1201-431-08-0000 168.96 0164-2803-01 1210-031-47-0000 132.45 Total Amount 30,303.74$ Page 2 of 2