HomeMy WebLinkAbout2008-2009 Single AuditCITY OF EVANSTON, ILLINOIS
SINGLE AUDIT ACT
SUPPLEMENTARY FINANCIAL
AND COMPLIANCE REPORT
YEAR ENDED FEBRUARY 28, 2009
CITY OF EVANSTON, ILLINOIS
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2009
TABLE OF CONTENTS
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 .....................................
Report on Compliance with Requirements Applicable to each
Major Program and Internal Control over Compliance
In Accordance with OMB Circular A-133 and
Schedule of Expenditures of Federal Awards ...........................
Schedule of Expenditures of Federal Awards ......................
Notes to Schedule of Expenditures of Federal Awards........
Schedule of Findings and Questioned Costs .......................
Summary Schedule of Prior Audit Findings .........................
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INDEPENDENT AUDITORS' 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
To the Honorable Elizabeth B. Tisdahl, Mayor and
Members of the City Council
Evanston, Illinois
We have audited the financial statements of the governmental activities, the business -type activities,
each major fund, and the aggregate remaining fund information of the City of Evanston, Illinois, as of
and for the year ended February 28, 2009, which collectively comprise the City of Evanston's basic
financial statements and have issued our report thereon dated August 20, 2009 We conducted our
audit 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 Township of Evanston
were not audited in accordance with Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the City of Evanston's internal control over
financial reporting as a basis for designing our auditing procedures for the purpose of expressing our
opinions on the financial statements, but not for the purpose of expressing an opinion on the
effectiveness of the City of Evanston's internal control over financial reporting. Accordingly, we do not
express an opinion on the effectiveness of the City of Evanston's internal control over financial
reporting.
Our consideration of the internal control over financial reporting was for the limited purpose described
in the preceding paragraph and would not necessarily identify all deficiencies in internal control over
financial reporting that might be significant deficiencies or material weaknesses. However, as
discussed below, we identified certain deficiencies in internal control that we consider to be significant
deficiencies.
A control deficiency exists 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
misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of
control deficiencies, that adversely affects the City of Evanston's ability to initiate, authorize, record,
process, or report financial data reliably in accordance with generally accepted accounting principles
such that there is more than a remote likelihood that a misstatement of the City of Evanston's financial
statements that is more than inconsequential will not be prevented or detected by the City of
Evanston's internal control over financial reporting. We consider the deficiencies described in the
accompanying schedule of findings and questioned costs to be significant deficiencies in internal
control over financial reporting. These deficiencies are items 2009-1, 2009-2, and 2009-3.
BAKER 'TILLY
IN "I I RNA IONAI
To the Honorable Elizabeth B. Tisdahl, Mayor and
Members of the City Council
Evanston, Illinois
A material weakness is a significant deficiency, or combination of significant deficiencies, that results
in more than a remote likelihood that a material misstatement of the financial statements will not be
prevented or detected by the City of Evanston's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described
in the first paragraph of this section and would not necessarily identify all deficiencies in the internal
control that might be significant deficiencies and, accordingly, would not necessarily disclose all
significant deficiencies that are also considered to be material weaknesses. However, of the significant
deficiencies identified above, we consider items 2009-2 and 2009-3 to be material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City of Evanston's basic financial
statements are free of material misstatement, we performed tests of its compliance with certain
provisions 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 tests disclosed no instances of noncompliance or
other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we reported to management of the City of Evanston in a separate letter
dated August 20, 2009.
The City of Evanston's response to the findings identified in our audit is described in the
accompanying schedule of findings and questioned costs. We did not audit the City of Evanston's
response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use of the City of Evanston's management,
others within the entity, federal awarding agencies and pass -through entities and is not intended to be,
and should not be, used anyone other than these specified parties.
Oak Brook, Illinois
August 20, 2009
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BAKER TILLY
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INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH
REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL
CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
AND THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
To the Honorable Elizabeth B. Tisdahl, Mayor and
Members of the City Council
Evanston, Illinois
Compliance
We have audited the compliance of the City of Evanston, Illinois, with the types of compliance
requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133
Compliance Supplement that are applicable to each of its major federal programs for the year ended
February 28, 2009. The City of Evanston's major federal programs are identified in the summary of
auditors' results section of the accompanying schedule of findings and questioned costs. Compliance
with the requirements of laws, regulations, contracts and grants applicable to each of its major federal
programs is the responsibility of the City of Evanston's management. Our responsibility is to express
an opinion on the City of Evanston's compliance based on our audit.
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 and OMB Circular A-133,
Audits of States, Local Governments, and Non -Profit Organizations. Those standards and OMB
Circular A-133 require 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 program occurred. An audit includes examining, on a test
basis, evidence about the City of Evanston'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. Our audit does not provide a legal determination of the
City of Evanston's compliance with those requirements
In our opinion, the City of Evanston complied, in all material respects, with the requirements referred
to above that are applicable to each of its major federal programs for the year ended February 28,
2009.
yBAKER'rILLY
I N I I RN A 10 NA I.
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To the Honorable Elizabeth B. Tisdahl, Mayor and
Members of the City Council
Evanston, Illinois
Internal Control Over Compliance
The management of the City of Evanston is responsible for establishing and maintaining effective
internal control over compliance with requirements of laws, regulations, contracts and grants
applicable to federal programs. In planning and performing our audit, we considered the City of
Evanston's internal control over compliance with requirements that could have a direct and material
effect on a major federal program in order to determine our auditing procedures for the purpose of
expressing our opinion on compliance, but not for the purpose of expressing an opinion on the
effectiveness of the internal control over compliance. Accordingly, we do not
express an opinion on the effectiveness of the City of Evanston's internal control over compliance.
A control deficiency in an entity's internal control over compliance exists 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 noncompliance with a type of compliance requirement of a
federal program on a timely basis. A significant deficiency is a control deficiency, or combination of
control deficiencies, that adversely affects the entity's ability to administer a federal program such that
there is more than a remote likelihood that noncompliance with a type of compliance requirement of a
federal program that is more than inconsequential will not be prevented or detected by the entity's
internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results
in more than a remote likelihood that material noncompliance with a type of compliance requirement of
a federal program will not be prevented or detected by the entity's internal control.
Our consideration of internal control over compliance was for the limited purpose described in the first
paragraph of this section and would not necessarily identify all deficiencies in internal control that
might be significant deficiencies or material weaknesses. We did not identify any deficiencies in
internal control over compliance that we consider to be material weaknesses, as defined above.
Schedule of Expenditures of Federal Awards
We have audited the financial statements of the governmental activities, the business -type activities,
each major fund, and the aggregate remaining fund information of the City of Evanston, Illinois, as of
and for the year ended February 28, 2009, which collectively comprise the City of Evanston's basic
financial statements and have issued our report thereon dated August 20, 2009. Our audit was
performed for the purpose of forming opinions on the financial statements that collectively comprise
the City of Evanston's basic financial statements. The accompanying schedule of expenditures of
federal awards is presented for purposes of additional analysis as required by OMB Circular A-133
and is not a required part of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is
fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
cZ
To the Honorable Elizabeth B. Tisdahl, Mayor and
Members of the City Council
Evanston, Illinois
This report is intended solely for the information and use of the City of Evanston's management,
others within the entity, federal awarding agencies and pass -through entities and is not intended to be,
and should not be, used by anyone other than these specified parties.
Oak Brook, Illinois
August 20, 2009
3&V
CITY OF EVANSTON, ILLINOIS
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE YEAR ENDED FEBRUARY 28, 2009
FEDERAL PASS -THROUGH EXPENDITURES
CFDA IDENTIFYING FOR THE
FEDERAL GRANTOR NUMBER NUMBER FISCAL YEAR
Direct Programs - Grants
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
COMMUNITY PLANNING AND DEVELOPMENT
Community Development Block Grant *
Entitlement year22
14.218
B96-MC-17-0012 $
1,116
Entitlement year 25
14.218
B99-MC-17-0012
51,095
Entitlement year 27
14.218
B01-MC-17-0013
6,624
Entitlement year 31
14.218
B05-MC-17-0012
21,912
Entitlement year 32
14.218
B06-MC-17-0012
25,973
Entitlement year 33
14.218
B07-MC-17-0012
105,337
Entitlement year 33
14,218
B08-MC-17-0012
2,018,990
Total Community Development Block Grant
2,231,047
Emergency Shelter Block Grant
14.231
S07-MC-17-0012
87,729
Total Emergency Shelter Block Grant
87,729
Home Investment Partnership *
HOME Program
14.239
M03-MC-17-0218
46,441
HOME Program
14.239
M04-MC-17-0218
162,284
HOME Program
14.239
M05-MC-17-0218
67,388
HOME Program
14.239
M06-MC-17-0218
70,808
HOME Program
14.239
M07-MC-17-0218
216,907
Total HOME Program
563,828
Total Department of Housing and Urban Development
2,882,604
* Denotes a Major Program (Continued)
The accompanying notes are an integral part of this schedule.
S:�
CITY OF EVANSTON, ILLINOIS
SCHEDULE OF EXPENDITURES
OF FEDERAL AWARDS
FOR THE YEAR ENDED FEBRUARY 28, 2009
FEDERAL
PASS -THROUGH
EXPENDITURES
CFDA
IDENTIFYING
FOR THE
FEDERAL GRANTOR
NUMBER
NUMBER
FISCAL YEAR
DEPARTMENT OF JUSTICE
OFFICE OF COMMUNITY ORIENTED POLICING SERVICES
Justice Assistant Grant
16.592
2006-DJ-BX-0689
$ 57,215
Law Enforcement Prosecutor Based Victim Assistance Grant
16.575
206245
22,880
Law Enforcement Prosecutor Based Victim Assistance Grant
16.575
208045
16,520
COPS - Other Tech. Grant
16.710
2008CKWX0592
9,353
Community Service Frog Grant
16.523
505029
11,200
Community Service Prog Grant
16.523
504429
6,904
Community Service Prog Grant
16.523
506029
10,800
Targeted Anit-Gang Initiative Grant
16.744
107104
17,500
Total Department of Justice
152,372
Pass -Through Programs - Grants and Loans
DEPARTMENT OF AGRICULTURE
Passed through State of Illinois Department of Public Health
Summer Lunch Program 10.559 14-016-51OP-00 94,599
Summer Food Inspection Program 10,559 78281027 450
Total Department of Agriculture 95,049
DEPARTMENT OF TRANSPORTATION
Passed through Chicago Metropolitan Agency for Planning
Bike System Plan 20.205 BP02040897 2,698
Passed through Illinois Department of Transportation
Twiggs Park Expansion & Bike Path 20.205 HPP-0299(106) 45,747
Total Department of Transportation 48,445
NATIONAL ENDOWMENT FOR THE HUMANITIES
Passed through the Illinois State Library
Library Services and Technology Act 45.310 08-5166 13,461
Total National Endowment for the Humanities 13,461
ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF WATER
Passed through the Illinois Environmental Protection Agency
Water Pollution Control Revolving Loan 66.458 1,912,194
Passed through State of Illinois Department of Public Health
Beachwater Testing 66.472 95380357 7,800
Total Environmental Protection Agency 1,919,994
* Denotes a Major Program (Continued)
The accompanying notes are an integral part of this schedule.
-7-
CITY OF EVANSTON, ILLINOIS
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE YEAR ENDED FEBRUARY 28, 2009
FEDERAL PASS -THROUGH
CFDA IDENTIFYING
FEDERAL GRANTOR NUMBER NUMBER
DEPARTMENT OF HEALTH AND HUMAN SERVICES
PUBLIC HEALTH SERVICE - I
OFFICE OF HUMAN DEVELOPMENT SERVICES
Passed through Suburban Area Agency on Aging
Ombudsman (Older Americans Act Title III B)
Special Programs for the Aging
Total Public Health Service - I
HEALTH CARE FINANCING ADMINISTRATION
PUBLIC HEALTH SERVICE - II
Passed through State of Illinois Department of Human Services
Teen Pregnancy Prevention
Teen Pregnancy Prevention
Total Teen Pregnancy Prevention
Teen Parent Services
Total Public Health Service - II
Bio Terrorism Grants
Bio Terrorism Preparedness
Bio Terrorism Preparedness
Cities Readiness Initiative (CRI)
Total Bio Terrorism Grants
Vector Prevention Grant
Total Department of Health and Human Services
* Denotes a Major Program
93.633 A13-119
93.994 11 G7095000
93.994 11 GK095234
EXPENDITURES
FOR THE
FISCAL YEAR
$ 23,967
23,967
48,500
9.513
58,013
93.667 11GKO95840 35,900
93,913
93.283 87181027 35,094
93.283 97181027 47,105
93,283 97181102 39,790
93.283 95380544
121,989
7,000
246,869
(Continued)
The accompanying notes are an integral part of this schedule.
M
CITY OF EVANSTON, ILLINOIS
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE YEAR ENDED FEBRUARY 28, 2009
FEDERAL PASS -THROUGH
CFDA IDENTIFYING
FEDERAL GRANTOR NUMBER NUMBER
FEDERAL EMERGENCY MANAGEMENT AGENCY
STATE AND LOCAL PROGRAMS AND SUPPORT
Passed through the Illinois Emergency Services
and Disaster Agency
Emergency Management Assistance Program
FYxlzly� i�YIk • • $ e
Total Federal Emergency Management Agency
Total Federal Financial Awards
* Denotes a Major Program
The accompanying notes are an integral part of this schedule.
EXPENDITURES
FOR THE
FISCAL YEAR
$ 10,651
10,651
$ 5,369,445
(Concluded)
sea
CITY OF EVANSTON
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the Year Ended February 28, 2009
NOTE 1 — REPORTING ENTITY
This report on Federal Awards includes the federal awards of the City of Evanston, Illinois.
The reporting entity for the city is based upon criteria established by the Governmental
Accounting Standards Board.
The City of Evanston is the primary government according to GASB criteria, while the Town of
the City of Evanston (Township) is a component unit.
Federal awards received directly by the Township are not included in this report since the
Township's maintains a different fiscal year end. Those amounts, if any, are audited in
conjunction with that fiscal year end and reported in a separate report.
NOTE 2 — BASIS OF PRESENTATION
The accounting records for some grant programs are maintained on the modified accrual basis
of accounting. Under the modified accrual basis, revenues are recorded when susceptible to
accrual, i.e., both measurable and available. Available means collectible within the current
period or soon enough thereafter to be used to pay liabilities of the current period.
Expenditures are recorded when the liability is incurred. The accounting records for other
grant programs are maintained on the accrual basis, i.e., when the revenue has been earned
and the liability is incurred.
The information in this schedule is presented in accordance with the requirements of OMB
Circular A-133, Audits of States, Local Governments, and Non-profit Organizations.
NOTE 3 — SUBRECIPIENTS
Of the federal expenditures presented in the schedule of expenditures of federal awards, the
City of Evanston provided federal awards to subrecipients as follows:
Amount
Federal CFDA Provided to
Program Title Number Subrecipients
Emergency Shelter Block Grant
Community Development Block Grant (CDBG)
14.231 $87,763
14118 $467,948
- 10 -
CITY OF EVANSTON
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the Year Ended February 28, 2009
NOTE 4 — PROGRAM INCOME
The City of Evanston received the following program income amounts for the year ended
February 28, 2009. The balances of receipts are from letter of credit drawdowns for the
program. The program expenditures for the year include expenditures of this program income.
Program income is not included in the award amount.
Program
Community Development Block Grant
(CDBG)
HOME Investment Partnership (HOME)
NOTE 6 — LOANS RECEIVABLE OUTSTANDING
CFDA No. Amount
14.218 $181,047
14.239 $36,003
The City of Evanston had the following loan receivable balances outstanding at February 28,
2009:
Program
Community Development Block Grant
(CDBG)
HOME Investment Partnership (HOME)
NOTE 6 — IEPA LOANS PAYABLE
CFDA No. Amount
14.218 $1,659,368
14.239 $3,324,696
During the year ended February 28, 2009, the City has 26 outstanding loans from the IEPA.
Federal funds are commingled with the IEPA loan balances. The city will repay loans solely
from revenues derived from the sewer system; the loans do not constitute a full faith and credit
obligation of the City. They will be repaid with equal installments consisting of principal plus
simple interest, on unpaid principal balances, over a period of 20 years. Initial balances will
consist of disbursements and interest accrued during construction. Repayments begin not later
than six months after completion of the construction.
Miff!
CITY OF EVANSTON
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the Year Ended February 28, 2009
Fiscal Year ending
February 28
Principal
Interest
2010
$ 8,009,410 $
2,721,182
2011
8,242,107
2,488,393
2012
8,481,677
2,248,729
2013
8,605,653
2,001,982
2014
8,163,724
1,754,587
2015 — 2019
34,086,498
5,701,518
2020-2024
18,751,996
2,091,788
2025 — 2029
7,434,158
407,053
Total
$ 101,775,223 $
19,415,232
12-
CITY OF EVANSTON, ILLINOIS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED FEBRUARY 28, 2009
Section I -Summary of Auditor's Results
Financial Statements
Type of auditor's report issued:
Internal control over financial reporting:
Material weakness(es) identified?
Significant deficiency(s) identified
not considered to be material weaknesses?
Noncompliance material to financial statements noted?
Federal Awards
Internal Control over major programs:
Material weakness(es) identified?
Significant deficiency(s) identified
not considered to be material weaknesses?
Type of auditor's report issued on compliance
for major programs:
Any audit findings disclosed that are required
to be reported in accordance with
Circular A-133, Section .510(a)?
Identification of major programs:
Name of Federal Prooram or Cluster
Community Development Block Grants (CDBG)
HOME Investment Partnership
Dollar threshold used to distinguish
between Type A and Type B programs:
Auditee qualified as low -risk auditee?
Unqualified
X yes no
X yes
yes X
none reported
no
yes X no
yes X none reported
Unqualified
yes X no
CFDA Number
14.218
14.239
$300,000
yes X no
-13-
CITY OF EVANSTON, ILLINOIS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED FEBRUARY 28, 2009
Section II -Financial Statement Findings
Finding number: 2009-1
Criteria: The City must have functioning internal controls over information technology.
Condition: Significant deficiencies in internal control over information technology were found
during our audit.
Context: During the course of our audit, we assessed the internal controls over information
technology (IT). Several information technology deficiencies were found such as
password policies that are not in line with best practices, lack of a system development
lifecycle policy, lack of review of access or permissions of the City's system, lack of
obtaining SAS 70 reports for the effectiveness of controls of third party providers, and
lack of a formalized process for adding, modifying, and removing employee access
rights.
Effect: Deficiencies in control over information technology could result in system errors or the
compromise of the City's systems and thus impact the financial information of the City
Cause: This finding was caused by deficiencies in the information technology systems and
procedures.
Recommendation: We recommend that management evaluate their internal controls over information
technology and develop controls to prevent and detect system errors or breaches.
Management or information technology staff may consider seeking additional training in
this area.
Management Response: We agree with the audit that certain applications do not follow industry best practices.
As they are purchased applications, the City has no control over their password
management.
We agree that the City should have this and have established a BPAT policy to that
effect. BPAT will initiate a user access and permission review for each of the following
applications with the department owner annually.
The City has a formal process to deactivate terminated employee access. This
involves an automated report from JDE/IRIS that identifies terminated employees. The
network accounts for the employees are automatically disabled and the BPAT service
desk is automatically notified. The BPAT service desk archives the individual's e-mail
and files unless the person's former manager asks that the files/e-mail be assigned to
them.
In addition, JDE/IRIS user accounts are disabled daily by BPAT based on the daily
termination report.
We agree that there should be a process for disabling user accounts in other
application systems. BPAT will send the daily termination report to the respective
application administrators so they can act on the terminations.
BPAT acquired the most recent SAS-70 report from Kubra on April 31d, 2009. BPAT
has established a policy to obtain the most recent SAS-70 from third party vendors on
an annual basis.
ill
CITY OF EVANSTON, ILLINOIS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED FEBRUARY 29, 2009
Section II -Financial Statement Findings
Finding number: 2009-2
Criteria: The City must have functioning internal controls over its various transaction
cycles.
Condition: The City has material weaknesses in its internal controls over cash disbursements and
accounts payable, payroll and human resources, licenses permits and fees, and utility billinc
The City also has weaknesses in its entity level controls.
Context: Below is a list of controls that should be in place to achieve a higher level of reliability
that errors or irregularities in the City's processes would be discovered by its staff. Our
procedures identified that these controls do not currently exist, or are not designed or
implemented properly, for the City of Evanston.
CASH DISBURSEMENTS AND ACCOUNTS PAYABLE
1. There is a lack of segregation of duties in the accounts payable process. The Accounts
Payable Clerk has the ability to create new vendors, create bills in the accounts payable
system, process checks with an authorized signature, and take custody of the checks after
printing.
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1. There is a lack of segregation of duties in the payroll department. Individuals have full
access to the payroll module and can add and modify employee information, specifically
pay rate changes.
2. There was inadequate documentation for certain payroll items, such as auto allowances,
within some Human Resource employee files authorizing the payment of these wages. The
City's policy is to document any authorized pay through a standard form
ENTITY LEVEL CONTROLS
1 The ability to prepare and enter journal entries is delegated to various levels of
finance; however there is no formal review process of non -routine transactions.
Therefore, an entry could be made without the knowledge of the appropriate
supervisor.
-15-
CITY OF EVANSTON, ILLINOIS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED FEBRUARY 29, 2009
Section II -Financial Statement Findings
Finding number: 2009-2, cont.
Effect: Lack of proper internal controls could result in a potential material misstatement of the
financial statements.
Cause: This material weakness was caused by a lack of adequate staffing and procedures in
place to have an effective system of internal controls.
Recommendation: We recommend that management review these control deficiencies and decide which
controls management can implement to address these deficiencies
Management Response: Controls Over Cash Disbursements and Accounts Payable
The City concurs that there is a lack of segregation of duties in the accounts payable
process although it should be noted that City Council approves vendor payments
prior to the distribution of vendor checks. Additional internal controls can be
obtained but due to limited resources, staff is often requested to perform a variety of
tasks.
Controls Over Payroll and Human Resources
Pay rate changes are performed by the City's Human Resources Department. In
addition, it is City policy that a personnel change form be completed for all individual
pay adjustments, excluding across-the-board cost of living increases which are
approved in total after being reviewed by Finance and Human Resources staff.
It is the City's intent to have written documentation for all employee compensation
paid located in personnel files on either a personnel change form or in an offer of
employment letter. In addition, Human Resources is currently reviewing the auto
allowance policy.
16-
CITY OF EVANSTON, ILLINOIS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED FEBRUARY 29, 2009
Section II -Financial Statement Findings
Finding number: 2009-2, cont.
Entity Level Controls
The City believes there are adequate controls in place to discover material
misstatement. Finance staff prepares monthly financial statements and investigates all
material budget to actual variances. Department Directors often review financial
information for their business units, especially during budget season when they must
review all the actual line item detail in order to accurately budget for the subsequent
year. Finally, bank reconciliations are yet another tool that aids in the discovery of
materially misstated postings.
-17-
CITY OF EVANSTON, ILLINOIS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED FEBRUARY 29, 2009
Section II -Financial Statement Findings
Finding number: 2009-3
Criteria: The City must have functioning internal controls over external financial reporting.
Condition: Material audit entries were required for the financial statements to be properly stated as of
February 28, 2009.
Context: During the course of our audit, material misstatements of the financial statements were found,
resulting in audit adjustments. The adjustments to the financial statements included the
following:
1. Recording of capitalized interest on 2008ABC bond issuance in the incorrect fund. $838,620
2 Recording of debt issuance premiums on 2008ABCD bond issuance in the incorrect fund.
$1,288,251
3. Reclassification of pension contribution expense from the Employer Contribution Fund to the
General Fund. $4,582,486
4. Reclassification of program revenues on the Statement of Activities from charges for services
to operating grants. $4,424,229
5. Reclassification of personal property replacement tax on the Statement of Activities.
$652,000
6. Recording of a capital lease to the General Fund and Governmental Activities. $1,035,370
7. Amendment of Construction Commitments footnote disclosure. $1,665,845
8. Reclassification of proprietary fund debt refunding to the Sherman Garage Fund and Sewer
Fund rather than the Debt Service fund. $37,455,000
9. Reclassification of net assets (restricted for debt service and invested in capital assets, net of
related debt) to unrestricted net assets. $8,052,848
Additionally, upon our examination of internal controls over external financial reporting,
we found the City does not fully utilize published literature of GASB required disclosures.
Effect: Management was unaware of material errors to their financial statements.
Cause: This finding was caused by insufficient internal controls over the external financial reporting
process.
Recommendation: We recommend that management evaluate their internal controls over financial reporting
and develop controls to prevent and detect material misstatements in the financial records.
Management might consider seeking additional training in this area.
Management Response: The City's response to the above adjustments are as follows
1. City concurs this adjustment was necessary although it was only a reclassification
journal entry and there was no overall financial impact to the financial statements.
2. City concurs this adjustment was necessary although it was only a reclassification
journal entry and there was no overall financial impact to the financial statements.
3. This adjustment had no financial impact to the City's overall financial statements.
4. This was a category reclassification only and had no financial impact to the City's
financial statement.
5. This was a category reclassification only and had no financial impact to the City's
financial statement.
6. City concurs that this adjustment was necessary to properly disclose a capital lease
as a capital asset in financial statement footnote.
10
CITY OF EVANSTON, ILLINOIS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED FEBRUARY 29, 2009
Section II -Financial Statement Findings
Finding number: 2009-3, cont.
7. This was a footnote disclosure adjustment only and had no impact to the City's financial
statements.
8. This was a reclassification adjustment only and had no impact to the City's overall financial
statements.
9. This was a reclassification adjustment only and had no impact to the City's overall financial
statements.
The City concurs that it should increase subscriptions and utilize to a greater extent relevant
GASB publications related to SAS#112.
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CITY OF EVANSTON, ILLINOIS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED FEBRUARY 28, 2009
Section III -Federal Award Findings and Questioned Costs
None reported.
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CITY OF EVANSTON, ILLINOIS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED FEBRUARY 28, 2009
Section III -Federal Award Findings and Questioned Costs
None reported.
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