R2004-086 06-14-04 RESOLUTION NO. R2004-86
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, ACCEPTING THE CITY'S ANNUAL FEDERAL SINGLE AUDIT
REPORT AS PREPARED BY THE ACCOUNTING FIRM OF PATTILLO,
BROWN AND HILL.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. That certain Federal Single Audit Report as prepared by Patillio, Brown
and Hill, a copy of which is attached hereto as Exhibit "A" and made a part hereof for all
purposes, is hereby authorized and approved.
That the City Council accepts the City's annual Federal Single Audit
Section 2.
Report.
PASSED, APPROVED and ADOPTED this the 14th day of
A.D., 2004.
June ,
TOM REID
MAYOR
ATTEST:
APPROVED AS TO FORM:
DARRIN M. COKER
CITY ATTORNEY
Exhibit "A"
Resolution IVo. R2004-86
EXHIBIT
CITY OF PEARLAND, TEXAS
FEDERAL SINGLE AUDIT REPORT
YEAR ENDED
SEPTEMBER 30, 2003
PATTILLO, BROWN & HILL, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS · BUSINESS CONSULTANTS
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CITY OF PEARLAND,TEXAS
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FEDERAL SINGLE AUDIT REPORT
TABLE OF CONTENTS
YEAR ENDED SEPTEMBER 30,2003
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Page
Number
Independent Auditors' Report on Compliance and on Internal
Control Over Financial Reporting Based on an Audit of the
rwel
Li Financial Standards Performed in Accordance With
Government Auditing Standards 1 —2
Independent Auditors' Report on Compliance With
the Requirements Applicable to Each Major Program,
Internal Control Over Compliance in Accordance With
OMB Circular A-133, and on the Schedule of
• Expenditures of Federal Awards 3—4
Schedule of Expenditures of Federal Awards 5
Note on Accounting Policies for Federal Awards 6
Schedule of Findings and Questioned Costs 7
Summary Schedule of Prior Audit Findings 8
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PATTILLO, BROWN & HILL, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS
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INDEPENDENT AUDITORS' REPORT ON COMPLIANCE AND ON
INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN
AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
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7.9 To the Honorable Mayor
and Members of the City Council
City of Pearland, Texas
' We have audited the financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information of the City of Pearland, Texas ("City"), as of and for the year ended
September 30, 2003, which collectively comprise the City's basic financial statements, and have issued
our report thereon dated January 2, 2004. 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.
Compliance
As part of obtaining reasonable assurance about whether the City's financial statements are free
of material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts and grants, 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.
r„ The results of our tests disclosed no instances of noncompliance that are required to be reported under
Government Auditing Standards.
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401 WEST HIGHWAY 6■P.O.BOX 20725■WACO,TX 76702-0725■(254)772-4901■FAX:(254)772-4920•www.pbhcpa.com
7AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778■HILLSBORO,TX(254)582-2583
TEMPLE,TX(254)791-3460■ALBUQUERQUE,NM(505)266-5904•RIO RANCHO,NM(505)898-3516
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� Internal Control Over Financial Reporting
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In planning and performing our audit, we considered the City's internal control over financial
reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the
L: financial statements and not to provide assurance on the internal control over financial reporting. Our
consideration of the internal control over financial reporting would not necessarily disclose all matters in
r, the internal control over financial reporting that might be material weaknesses. A material weakness is a
condition in which the design or operation of one or more of the internal control components does not
reduce to a relatively low level the risk that misstatements in amounts that would be material in relation
to the financial statements being audited may occur and not be detected within a timely period by
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employees in the normal course of performing their assigned functions. We noted no matters involving
the internal control over financial reporting and its operation that we consider to be material weaknesses.
However,_we noted other matters involving the internal control over financial reporting that we have
L i reported to management of the City in a separate letter dated January 2, 2004.
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This report is intended solely for your information and use and the information and use of
management, federal awarding agencies, and pass-through entities and is not intended to be, and should
f' not be,used by anyone other than those specified parties.
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January 2,2004
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PATTILLO, BROWN & HILL, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE
7. WITH THE REQUIREMENTS APPLICABLE TO EACH MAJOR
PROGRAM,INTERNAL CONTROL OVER COMPLIANCE IN
ACCORDANCE WITH OMB CIRCULAR A-133 AND
ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
To the Honorable Mayor
and Members of the City Council
r'+ City of Pearland, Texas
Compliance
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We have audited the compliance of the City of Pearland ("City") 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 its major federal program for the year ended September
30, 2003. The City's major federal program is 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 its major federal program is the responsibility of the
City's management. Our responsibility is to express an opinion on the City'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 Nonprofit 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'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 on the City's compliance with those
requirements.
In our opinion, the City of Pearland, Texas, complied, in all material respects, with the
requirements referred to above that are applicable to its major federal program for the year ended
September 30, 2003.
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401 WEST HIGHWAY 6■P.O.BOX 20725■WACO,TX 76702-0725■(254)772-4901■FAX:(254)772-4920■www.pbhcpa.com
-14 AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778■HILLSBORO,TX(254)582-2583
TEMPLE,TX(254)791-3460•ALBUQUERQUE,NM(505)266-5904■RIO RANCHO,NM(505)898-3516
Internal Control Over Compliance
The City's management 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'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 and
to test and report on internal control over compliance in accordance with OMB Circular A-133.
Our consideration of the internal control over compliance would not necessarily disclose all
matters in the internal control that might be material weaknesses. A material weakness is a condition in
which the design or operation of one or more of the internal control components does not reduce to a
relatively low level the risk that noncompliance with applicable requirements of laws, regulations,
contracts and grants that would be material in relation to a major federal program being audited may
occur and not be detected within a timely period by employees in the normal course of performing their
assigned functions. We noted no matters involving the internal control over compliance and its
L ` operation that we might consider to be material weaknesses.
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Schedule of Expenditures of Federal Awards
We have audited financial statements of the governmental activities, the business-type activities,
the aggregate discretely presented component units, each major fund and the aggregate remaining fund
information of the City as of and for the year ended September 30, 2003, and have issued our report
thereon dated January 2, 2004. Our audit was performed for the purpose of forming opinions on the
financial statements that collectively comprise the City'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 of the City. 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.
This report is intended solely for your information and use and the information and use of
management, federal awarding agencies, and pass-through entities and is not intended to be, and should
not be,used by anyone other than those specified parties.
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January 2, 2004
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,.m CITY OF PEARLAND,TEXAS
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE YEAR ENDED SEPTEMBER 30,2003
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Federal
Project Federal Grantor/Pass Through CFDA
Number Grantor/Program Title Number Expenditures
FEDERAL AWARDS
U. S.Department of Commerce
08-01-03185 Economic Development Administration Project 11.300 $ 1,500,000
Total U. S.Department of Commerce 1,500,000
U. S.Department of Justice
LL N/A Bullet-Proof Vest Program 16.607 4,706
200SHWX0601 COPS in Schools 16.710 250,000
IL Total U. S.Department of Justice 254,706
Environmental Protection Agency
Passed through Texas Water Development Board:
3393-02 Capitalization Grants for State Revolving Funds 66.452 2,371,747
Total Passed through Texas Water
Development Board 2,371,747
Total Environmental Protection Agency 2,371,747
Federal Emergency Management Assistance •
Passed through Texas Department of Public Safety:
1379-DR 04 FEMA-1379-DR Tropical Storm Allison 83.544 83,889
EMT-2001-GR-0005 Emergency Management Performance Grants 83.552 12,855
Total Passed through Texas Department of
Public Safety 96,744
Total Federal Emergency Management Assistance 96,744
U. S.Department of Homeland Security
Passed through Texas Department of Public Safety:
2002-001-035 Flood Mitigation Planning 97.029 13,769
Total Passed through Texas Department of
Public Safety 13,769
Total U.S.Department of Homeland Security 13,769
Total Federal Awards $ 4,236,966
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CITY OF PEARLAND,TEXAS
NOTE ON ACCOUNTING POLICIES FOR FEDERAL AWARDS
YEAR ENDED SEPTEMBER 30,2003
BASIS OF ACCOUNTING
The City accounts for all awards under federal programs in Special Revenue and Enterprise Funds.
Special Revenue Fund programs are accounted for using a current financial resources measurement
focus. With this measurement focus, only current assets and current liabilities generally are included
on the balance sheet. Operating statements of these funds present increases (i.e. revenue and other
financing sources) and decreases(i.e. expenditures and other financing uses)in net current assets.
The modified accrual basis of accounting is used for these programs. This basis of accounting
P,y recognizes revenue in the accounting period in which it becomes susceptible to accrual, i.e., both
measurable and available, and expenditures in the accounting period in which the liability is
incurred, if measurable, except for certain compensated absences and claims and judgments, which
are recognized when the obligations are expected to be liquidated with expendable available
financial resources.
Federal grant funds for Special Revenue Fund programs are considered to be earned to the extent of
expenditures made under the provisions of the grant and, accordingly, when such funds are received,
they are recorded as deferred revenue until earned. Generally, unused balances are returned to the
grantor at the close of specified project periods.
Enterprise Fund programs are accounted for on a flow of economic resources measurement focus.
focus, all assets and liabilities associated with the operation of the programs
With this measurement o p p gr
are included on the balance sheet. Operating statements present increases (revenue) and decreases
(expenses) in net total assets.
The full accrual basis of accounting is used for these programs. This basis of accounting recognizes
revenue when earned and expenses when incurred. The Enterprise Fund programs follow generally
accepted accounting principles prescribed by the Governmental Accounting Standards Board and
Financial Accounting Standards Board standards issued prior to November 30, 1989. Subsequent to
this date, these programs are accounted for as prescribed by the Governmental Accounting Standards
Board.
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r� CITY OF PEARLAND,TEXAS
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SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR 111E YEAR ENDED SEPTEMBER 30,2003
Summary of Auditors' Results
Type of report on financial statements Unqualified
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Internal control over financial reporting:
Material weakness(es)identified? No
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Reportable condition(s) identified that are not None reported
considered to be material weakness(es)?
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Internal control over major programs:
Material weakness (es)identified? No
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L Reportable condition(s)identified that are not None reported
considered to be material weakness(es)?
I Noncompliance which is material to the None
financial statements
Li Type of report on compliance with major Unqualified
Programs
Findings and questioned costs for federal None
awards as defined in Section 501(a), OMB
Circular A-133
L Dollar threshold considered between Type A $300,000
and Type B federal programs
Low risk auditee statement The City was classified as a low-risk auditee in
the context of OMB Circular A-133.
Major federal program Economic Development Administration Project,
CFDA#11.300
Findings Relating to the Financial Statements Which are
Required to be Reported in Accordance With Generally
fl Accepted Government Auditing Standards
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None
Findings and Questioned Costs for Federal Awards
`'' None
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CITY OF PEARLAND,TEXAS
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SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
FOR IHE YEAR ENDED SEPTEMBER 30,2003
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None
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