R2004-084 05-24-04 RESOLUTION NO. R2004-84
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, ACCEPTING THE CITY'S ANNUAL AUDIT LETTER 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 financial audit letter 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.
Section 2. That the City Council accepts the City's annual financial audit letter.
PASSED,APPROVED and ADOPTED this the 24th day of May
A.D., 2004.
jp
• TOM REID
MAYOR
ATTEST:
NG , T
C Y SECRETARY
APPROVED AS TO FORM:
DARRIN M. COKER
CITY ATTORNEY
•
City of Pearland
Interoffice Memorandum
To: Mayor and City Council From: Andrea Gardner
Bill Eisen, City Manager
Date: May 19, 2004
Subject: Staff Response to
Management Letter
Comments
As you are aware a Management Letter is issued from out external auditors on an annual basis with our
Comprehensive Annual Financial Report. A copy of this letter is attached along with the City's staff response to
each comment.
Current Year Comments
• Comment: Antifraud Programs and Controls
o Staff Response: New Auditing Standard being issued requiring external audit firm to make clients
aware of fraud. The bulk of the new standard places responsibility on the external audit firm and its
staff. We are developing an Antifraud Policy and are in the process of implementing controls in
cash handling with the assignment of a central cashier for the City of Pearland (training is
scheduled for May 28, 2004).
• Comment: Internal Auditor
o Staff Response: This comment was added at the request of the Finance Director but was not
worded as intended. The Finance Director requested we have a staff member assume auditing
duties and not that we add an additional staff member to fill an "Internal Auditor" position. We have
changed the job description for the Senior Accountant to include internal audit duties and functions.
• Comment: Evaluation of Potential Additional Component Units
o Staff Response: At this time no potential component units exist
• Comment: Infrastructure Reporting
o Staff Response: GIS, Projects and Engineering are working together to complete the Infrastructure
Reporting by then end of the fiscal year ending September 30, 2004
• Comment: General Capital Asset Reporting
o Staff Response: Working with American Appraisal Associates on maintaining accurate records for
external reporting and insurance purposes. Finance Director has set up and implemented
procedures for better internal accounting of assets.
• Comment: Collateralization of Investments
o Staff Response: Have met with Investment Advisor, Patterson &Associates, to review all
depository contracts and make sure they all include language to require 102% collaterization. After
reviewing the contracts for all three financial institutions (Wells Fargo Bank, Pearland State Bank
and First Community Bank), we have determined the contract with Wells Fargo clearly states that
the bank is responsible for the monitoring and maintenance of collateral and required margins at all
times. To the contrary, Pearland State Bank and First Community Bank hold City funds without
any contract in place. New contracts have been prepared for these two institutions and will be
executed immediately.
• Comment: Grant Centralization
o Staff Response: Will be reviewed in the FY 2005 Budget Process
• Comment: Bank Reconciliations
o Staff Response: Bank reconciliations have been brought current(April 2004 bank reconciliations
for the City of Pearland's operating, FEMA, Alvin ISD and 98 Certificate of Obligation accounts
have been completed). The delay in completing reconciliations was due to turnover and resulting
vacant positions in the Finance Department and staff has been hired to ensure the bank
reconciliations are completed in a timely manner. The new standard for bank reconciliations set by
the Finance Director is all reconciliations are to be completed for a given month by the fifteenth day
of the following month.
Staff Response to Management Letter Comments
May 19, 2004
• Comment: Reconciliation of Subsidiary Ledgers to Control Accounts
o Controls have been put into place to eliminate this problem in the future and Finance will begin
balancing the Water& Sewer Trial Balance to the General Ledger on a daily basis by the end of
fiscal year 2004. Finance Director has scheduled an H.T.E. trainer to come on site and assist with
this process. Once training is complete, standard operating procedures will be put into place.
• Comment: Journal Entries
o Journal Entry recording procedures have been changed and detailed documentation is being
maintained. Journal entries are now recorded on a standard form and are numbered for auditing
purposes. All journal entries are being made in order to ensure the books for a given month are
closed by the tenth day of the following month.
Prior Year Comments
• Comment: GASB Statement No. 34
o The City implemented GASB 34 in the current year
• Comment: Customer Deposits
o Director of Finance is working to resolve this issue. A Needs Assessment was completed in April
2004 and procedures will be implemented by the end of Fiscal Year 2004 to correct all outstanding
issues.
• Comment: Water Department
o Finance Director has implemented a Delinquent Account Collections program and has been
successful with collections to date. Will continue with existing program as well as implementing
other procedures to control delinquent accounts.
Thanks for your time.
drea Gard Director of Finance