06-25-07 Item 7B, 2006 Financial Statement Presentation

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DATE: June 19,2007 7B. ~ .-A~HILLS MEMORANDUM TO: Honorable Mayor and City Council Michelle Wolfe, City Administrator FROM: Sue Iverson, Finance Director SUBJECT: 2006 City Financial Statements BackgroundJDiscussion: The City's 2006 Financial Statements have now been completed and are in production. Copies of the reports will be distributed at Monday's meeting. The City's auditor will be present to give an overview and answer questions. The auditors have issued an unqualified ("clean") opinion on our financial statements for the year ended December 31, 2006. The total general fund balance at December 31, 2006 was $1,586,438 or 53% of total general fund expenditures for 2007. The general fund balance increased by $71,658. The City's total net assets increased by $1,838,828 and the combined ending fund balances were $9,526,330. In the past, the auditor has done the financial statement preparation for the City. Staff has completed the statement "in-house" this year, which is a first for the City. We have also completed the report in the form prescribed by the Government Finance Officers Association of United States and Canada (GFOA) for their Certificate of Achievement for Excellence in Financial Reporting. In order to qualifY for this, the report has to be published in an easily readable and efficiently organized Comprehensive Annual Financial Report (CAFR) that satisfies both accounting principles generally accepted in the United States of America and applicable legal requirements. Staff will submit this report to the GFOA CAFR program. As a note of information, the changes to Auditing Standards are increasing and changing. With these changes, you will see increased findings. As a result of this, things which have always been present, such as segregation of duties, or adjusting journal entries found by the auditor will now be reported in the Schedule of Findings and Responses; before these may have been reported as informational items. This does not mean that the City has done anything wrong compared to previous years, only that the reporting requirements have become much stricter. Many cities are experiencing these findings, and the findings are expected to increase for all cities as these standards become stricter. Another item to note is that the City had no Finance Director for the last five months of 2006, the Accounting Analyst left before year- end, and support staff essentially took on the duties. Staff is responding to these finclings, but in light of the circumstances is pleased with the outcome of the audit. As a final reporting requirement, staff is preparing the required reports for the State Auditor's Office and submitting a copy of these financial reports.