1. City of Van Alstyne 2016 Annual Financial Report
Presented by: Susan K. LaFollett CPA
Managing Partner
LaFollett and Abbott PLLC
Certified Public Accountants
May 9, 2017

2. Agenda Objectives & Scope of Audit Financial Report
Financial Highlights
Overview of Audit Results
Recommendations
Required Governance Communications Letter
Closing Remarks

3. Objectives & Scope of Audit
Conduct an audit in accordance with Government Auditing Standards
Plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement
Full Scope Audit
Governmental Activities
Business-type Activities
Component Units – EDC & CDC
Each Major Fund

4. Financial Report Table of Contents
Independent Auditor’s Report (pgs. 1-2)
Management’s Discussion and Analysis (pgs. 3-7)
Government-Wide Financial Statements (pgs. 8-9)
Fund Financial Statements (pgs )
Notes to Financial Statements (pgs )
Required Supplemental Information (pgs )
Independent Auditor’s Report on Internal Controls and Compliance (pgs )

5. Financial Highlights – Government-Wide Statements
Full Accrual Basis:
Net Position of City is $7,766,719 (pg. 8) at FYE16.
Overall, Net Position of the City increased by $1,207,934 (pg. 9) or 16%.
Unrestricted Net Position of City is $828,602 (pg. 8) at FYE16. This is an increase of $47,889 from FYE15.

6. Financial Highlights – Government-Wide Statements
This is year two for GASB Standard #68 – Accounting and Financial Reporting for Pensions
TMRS has estimated the City’s pension liability to be $700,375 (pg. 8) at FYE16, which is an increase of $176,579 from FYE15.
The Schedule of Changes in Net Pension Liability (pg. 44) shows the City’s pension is 82% funded at FYE16.

7. Financial Highlights – Fund Statements – General Fund
General Fund unassigned fund balances (pg. 10):
$979,764 at FYE16
$701,868 at FYE15
Increase by $277,896
These funds can be used to meet the City’s ongoing obligations
Represents 3.7 months reserves at FYE16
3 to 6 months reserve is optimal
The City had 1.82 months reserves at FYE13
Overall, the General Fund had an increase in fund balances of $250,422 (pg. 12) for FYE16

8. Financial Highlights – Fund Statements – Water & Sewer
Water & Sewer Fund unrestricted net position (pg. 14):
$(165,668) at FYE16
($297,279) at FYE15
The reduction of the negative balance in the amount of $131,611 resulted from rate increases
There is no reserves at FYE16, which may be used to meet the Fund’s ongoing obligations.
3 to 6 months reserve is optimal
Total net position increased by $328,886 (pg. 15) or 7%.

9. Financial Highlights – Component Units
Discretely Presented Component Units (pgs. 8-9):
EDC
Total Net Position - $675,234
Net Change - increase in Net Position $79,593
CDC
Total Net Position - $267,835
Net Change - increase in Net Position $4,486

10. Overview of Audit Results
Independent Auditors Report (pgs. 1-2)
Unmodified Audit Opinion (“Clean Opinion”)

11. Overview of Audit Results
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 (pgs )
Material Weakness:
Accounts Payable Reconciliation – the City did not reconcile the accounts payable detail per the module to the general ledger. As a result, accounts payable and various expenses per the general ledger were overstated by $36,114 in the General Fund and $41,182 in the Water & Sewer Fund
A material weakness is a deficiency 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.

12. Overview of Audit Results
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 (pgs )
Significant Deficiency:
Cash Reconciliations – the City has numerous cash accounts that are reconciled manually. The manual process, along with inadequate review, resulted in errors that were not detected until the audit. Cash was overstated by $38,939 in the Debt Service Fund and understated by $13,014 in the General Fund
A significant deficiency is a deficiency in internal control that is less severe that a material weakness, yet important enough to merit attention by those charged with governance.

13. Recommendations
Adopt budgets for the Water & Sewer Fund to increase overall net position and the unrestricted net position to an optimal amount of 3–6 months of operating expenses.
Capitalize all governmental fixed asset purchases greater than $5,000 and utilize the capital outlay accounts to record these purchases.
Reconcile ambulance revenue per the general ledger to cash receipts per the third party billing company reports on a monthly basis.
Reconcile court revenue per the general ledger to the court receipts detail per the court system reports on a monthly basis.
Continue to work closely with the City consultant to refine year-end closing procedures to ensure that all routine closing adjustments are posted before the audit.

14. Recommendations CDC EDC
Closely monitor cash balances and the risk of uninsured cash.
EDC
Continue to refine year-end closing procedures to ensure that all routine closing adjustments are correctly posted.

15. Required Governance Communications Letter
Miscellaneous matters discussed in this letter:
Qualitative Aspects of Accounting Practices –
Sensitive estimates – allowance for uncollectible municipal court fines and ambulance services
Significant disclosures – long-term debt
Difficulties encountered in performing the audit – none
Corrected and uncorrected misstatements -
All recommended adjustments were accepted by the City – see list at Schedule A
Various immaterial uncorrected adjustments were noted – see list at Schedule B
Disagreements with management – none

16. Closing Remarks We would like to thank: Frank Baker - City Manager
Jennifer Gould - City Clerk
EDC/CDC - Kanita Larkins & Doti Izzi
These individuals were very responsive to our audit requests and a pleasure to work with on this engagement.
Questions or Comments?