R2000-094 08-28-00RESOLUTION NO. R2000-94
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, ACCEPTING THE CITY'S FEDERAL SINGLE AUDIT REPORT
FOR THE YEAR ENDED SEPTEMBER 30, 1999.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. That certain Federal Single Audit Report prepared by Null-Lairson,
P.C., a copy of which is attached hereto as Exhibit "A" and made a part hereof for all
purposes, is hereby accepted.
PASSED, APPROVED and ADOPTED this the 28th day of August
A.D., 2000.
TOM REID
MAYOR
ATTEST:
APPROVED AS TO FORM:
/r,
DARRIN M COKER
CITY ATTORNEY
CITY OF PEARLAND, TEXAS
FEDERAL SINGLE AUDIT REPORT
YEAR ENDED SEPTEMBER 30, 1999
Null - Lairson
Professional Corporation
Certified Public Accountants
11 Greenway Plaza, Suite 1515
Houston Texas 77046
(713) 621-1515
11 Caeenway Plaza, Suite 1515
Houston, CX 77046
(713) 621-1515 • Fax: (713) 621-1570
NuIIALairson
CI:RI11 11 1) I'IIRIJC ACCOLINIAN I S
PROFESSIONAL CORI'OWUION
One Sugar Creek Center Blvd., Suite 920
Sugar Land, Tx 77478
(281) 242-8600 • Fax: (281) 242-7333
Independent Auditors' Report
on Schedule of Expenditures of Federal Awards
To the Honorable Mayor and
Members of City Council
City of Pearland, Texas
We have audited the general-purpose financial statements of the City of Pearland Texas, (the
"City") as of and for the year ended September 30 1999, and have issued our report thereon dated
January 11, 2000. These general-purpose financial statements are the responsibility of the City's
management. Our responsibility is to express an opinion on these general-purpose financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and the standards
applicable to financial audits contained in Government Auditing Standards issued by the
Comptroller General of the United States. Those standards and provisions require that we plan and
perform the audit to obtain reasonable assurance about whether the general-purpose financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the general-purpose financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
Our audit was made for the purpose of forming an opinion on the general-purpose financial
statements taken as a whole. The accompanying schedule of federal awards is presented for
purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-
133, Audits of States, Local Governments, and Non -Profit Organizations, and is not a required part
of the general-purpose financial statements of the City. Such information has been subjected to the
auditing procedures applied in the audit of the general-purpose financial statements and, in our
opinion, is fairly presented in all material respects in relation to the general-purpose financial
statements taken as a whole.
'nil ,p, .
Houston Texas
January 11, 2000
CITY OF PEARLAND, TEXAS
FEDERAL SINGLE AUDIT REPORT
YEAR ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
Independent Auditors' Report on Schedule of Expenditures of Federal Awards
Schedule of Expenditures of Federal Awards
Page
1
2
Note on Accounting Policies for Federal Awards 3
Independent Auditors' Report on Compliance and on Internal Control Over
Financial Reporting Based on an Audit of the General-purpose Financial
Statements Performed In Accordance With Government Auditing Standards
Independent Auditors' Report on Compliance with the Requirements Applicable
to Each Major Program and Internal Control Over Compliance in Accordance
with OMB Circular A-133
Schedule of Findings and Questioned Costs
Status of Prior Findings
Corrective Action Plan
4-5
6-7
8-11
12
13
11 Grcenway Plaza, Suite 1515
Iloustun, l \ 77046
(7131621-1515 • Pax: (71 3) 621 1570
nullALairson
(I I:111 II I) P11131 IC AAC(Ol IN IAN'1 S
I'ROI I.SSI )I`N`AI CO:I'0KA\11ON
One Sugar Creek Center Blvd., Suite 920
Sugar Land,? \ 77478
(281) 242-8600 • P ix: (281) 2,12 7333
Independent Auditors' Report
on Schedule of Expenditures of Federal Awards
To the Honorable Mayor and
Members of City Council
City of Pearland, Texas
We have audited the general-purpose financial statements of the City of Pearland Texas, (the
"City") as of and for the year ended September 30 1999, and have issued our report thereon dated
January 11, 2000. These general-purpose financial statements are the responsibility of the City's
management. Our responsibility is to express an opinion on these general-purpose financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and the standards
applicable to financial audits contained in Government Auditing Standards issued by the
Comptroller General of the United States. Those standards and provisions require that we plan and
perform the audit to obtain reasonable assurance about whether the general-purpose financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the general-purpose financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
Our audit was made for the purpose of forming an opinion on the general-purpose financial
statements taken as a whole. The accompanying schedule of federal awards is presented for
purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-
133, Audits of States, Local Governments and Non -Profit Organizations, and is not a required part
of the general-purpose financial statements of the City. Such information has been subjected to the
auditing procedures applied in the audit of the general-purpose financial statements and, in our
opinion, is fairly presented in all material respects in relation to the general-purpose financial
statements taken as a whole.
Houston, Texas
January 11, 2000
cX2 / P. C.
CITY OF PEARLAND, TEXAS
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED SEPTEMBER 30, 1999
Federal Grantor/Pass-through Federal
Grantor/Program Title CFDA
Number
FEDERAL AWARDS
DEPARTMENT OF AGRICULTURE
Passed Through Texas Forest Service
Public Outreach (Urban Forestry)
10.664
US HOUSING AND URBAN DEVELOPMENT
Passed Through Harris County Community
Development
Community Development Block Grant
(Hatfield/Woody)
14.218
BUREAU OF JUSTICE, ASSISTANCE
Local Law Enforcement Block Grant 16.592
US DEPARTMENT OF JUSTICE
COPS FAST Universal Hiring 16.710
US DEPARTMENT OF JUSTICE
Governor's Office - Criminal Justice Division
Combating Underage Drinking 16.727
ENVIRONMENTAL PROTECTION AGENCY
P assed Through Texas Water Development Board
State Revolving Fund 66.458
Pass - Through
Grantor's/
Contract
Number
Program
Or Award
Amount
97-07-03 $
CD 94-066
97LBVX4864
95CFWX307
AH-98-J01-1
3393-02
FEDERAL EMERGENCY MANAGEMENT ASSISTANCE
P assed Through Texas Department of Public Safety
EMT Grant 83.534 1999-PA-001
US DEPARTMENT OF EDUCATION
P assed Through Texas State Library & Archive
Library Construction Grant 84.154
TOTAL FEDERAL AWARDS
597.6
Disburse-
ment/
Expend-
itures
$ 6,643
4,235
6,824
288,258
22,632
281,780
15,709
30,000
$ - $ 656,081
2
CITY OF PEARLAND, TEXAS
NOTE ON ACCOUNTING POLICIES FOR FEDERAL AWARDS
YEAR ENDED SEPTEMBER 30, 1999
NOTE - BASIS OF ACCOUNTING
The City accounts for all awards under federal programs in the General, Special Revenue,
and Enterprise Funds. These 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. revenues 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 funds. This basis of accounting
recognizes revenues in the accounting period in which they become 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 governmental funds 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 revenues until earned. Generally, unused balances
are returned to the grantor at the close of specified project periods.
3
11 Greenway Plata, Suite 1515
1 louston, I'\ 77046
(713) 621-1515 • Fax: (713) 621-1570
RullALairson
CI 11 II III) PI IN IC AC 00I IN I ANIS
PKOFFSSIO;N,AI. t:OIJ'ORA(I( N
•
One Sugar Creek Center I3lvd., Suite 920
Sugar Land,TA 77478
(281) 242-8600 • Fax: (281) 242-7333
Independent Auditors' Report on Compliance and on Internal Control Over
Financial Reporting Based on an Audit of the General-purpose Financial Statements
Performed In Accordance With Government Auditing Standards
To the Honorable Mayor and
Members of City Council
City of Pearland, Texas
We have audited the general-purpose financial statements of the City of Pearland, Texas, as of and
for the year ended September 30 1999, and have issued our report thereon dated January 11, 2000.
We conducted our audit in accordance with generally accepted auditing 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 of Pearland's, general-purpose
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. The results of our tests disclosed one instance on
noncompliance relating to delinquent tax receipts for the Debt Service Fund that has been described
in the accompanying Schedule of Findings and Questioned Costs as item 99-1.
Internal Control Over Financial Reporting
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 general-purpose financial statements and not to provide assurance on the internal control over
financial reporting. However, we noted certain matters involving the internal control over financial
reporting and its operation that we consider to be reportable conditions. Reportable conditions
involve matters coming to our attention relating to significant deficiencies in the design or operation
of the internal control over financial reporting that, in our judgment, could adversely effect the
City's ability to record, process, summarize, and report financial statements. A reportable condition
relating to financial reporting is described in the accompanying Schedule of Findings and
Questioned Costs as items 99-2 through 99-5.
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 general-purpose financial statements being audited may
occur and not be detected within a timely period by employees in the normal course of performing
To the Honorable Mayor and
Members of City Council
City of Pearland, Texas
Page 2
Internal Control Over Financial Reporting (continued)
their assigned functions. Our consideration of the internal control over financial reporting would not
necessarily disclose all matters in the internal control that might be reportable conditions and,
accordingly, would not necessarily disclose all reportable conditions that are also considered to be
material weaknesses. However, of the reportable conditions described above, we consider items
99-4 and 99-5 to be material weaknesses.
This report is intended solely for the information and use of the audit committee, 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.
Houston Texas
January 11, 2000
5
I1 Grecnway Plaza, Suite 1515
Houston, IX 77046
(713) 621-1515 • Fax: (713) 621-1570
AL
Null•Lairson
CI R 11111 1) P1.II3IIC l\CC(UNU\N T.S
PR )1ISSIONiAI.CORPORAL ION
One Sugar Creek Center Blvd., Suite 920
Sugar Land, "Fa 77478
(281) 242-8600 • P ix: (281) 242-7 333
Independent Auditors' Report on Compliance With the Requirements
Applicable to Each Major Program and Internal Control
Over Compliance in Accordance with OMB Circular A-133
To the Honorable Mayor and
Members of City Council
City of Pearland, Texas
Compliance
We have audited the compliance of the City of Pearland 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 September
30, 1999. The City's major federal programs are identified in the summary of auditor's 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 Pearland'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 generally accepted auditing standards;
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'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 requirements
referred to above that are applicable to each of its major federal programs for the year ended
September 30, 1999.
Internal Control Over Compliance
The management of the City of Pearland, Texas, 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
To the Honorable Mayor and
Members of City Council
City of Pearland, Texas
Page 2
Internal Control Over Compliance (continued)
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 operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the audit committee, 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.
Houston Texas
January 11, 2000
724401 Va‘el "a" Ci
7
CITY OF PEARLAND, TEXAS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
SUMMARY
OF
AUDITORS'
RESULTS
SECTION
LEVEL
DESCRIPTION
FINANCIAL
STATEMENTS
statements.
Type
of
auditors'
report
issued
on financial
Unqualified.
Findings
related
to compliance
with
laws and
Yes
—
finding
99-1.
regulations.
Reportable
conditions
noted
in
relation
to internal
Yes
findings
99-2 and
99-3.
control
over
financial
reporting.
—
Material
weaknesses
noted
in relation
to internal
Yes -
findings
99-4,
and
99-5.
control
over
financial
reporting.
FEDERAL
AWARDS
programs.
Type
of
report
on
compliance
with
major
Unqualified.
Findings
and
costs
for
federal
awards
questioned
in
OMB
Circular
A-
There
were no
known
questioned
costs
above
as
133.
defined
section
.510(a)
$10,000.
in
internal
Reportable
controls
applicable
over
conditions
to
compliance
each
major
reported
with
program
requirements
relation
None
reported.
Material
controls
weaknesses
over
compliance
noted
in
with
relation
requirements
internal
None.
applicable
to
each
major
program
Dollar
type
B
threshold
federal
programs.
considered
between
type
A and
$300,000.
Low risk
auditee
statements.
The
City
was not
classified
as
a
low -risk
auditee
in
the
context
of
OMB
Circular
A-133.
1. State
Revolving
Fund
(SRF)
(CFDA
Major
Federal
Programs.
#66.458)
2.
COPS
Fast
Universal
Hiring(CFDA
16.710)
Entity.
1.
Texas Water
Development
Board
for SRF
Pass -through
project
# 3393-02
2.
Direct
for
the
COPS
FAST
grant
#
95CFWX307.
CITY OF PEARLAND, TEXAS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS (continued)
FOR THE YEAR ENDED SEPTEMBER 30, 1999
FINDINGS RELATED TO FINANCIAL STATEMENTS
Finding Related To Compliance With Laws and Regulations — Financial Statements
Compliance Finding
Compliance Finding #99-1 Delinquent Tax
Receipts Regarding the Debt Service Fund
Criteria
Delinquent tax receipts are not being allocated
to the debt service fund
Delinquent tax receipts should be allocated to
General and Debt Service funds based on rates
in effect for the year of the tax levy.
Effect
Recommendation
Not recording delinquent tax receipts in the debt
service fund has resulted in lower revenue of
approximately $350,000 in this fund over the
past several years. In addition, not allocating
these receipts properly could have compliance
repercussions for the City s outstanding bonds.
The City should allocate debt service fund
delinquent tax receipts to General and Debt
Service Funds properly.
Findings Related to Internal Controls - Financial Statements
Reportable Conditions
Reportable Condition #99-2 Motor Fleet and
Gasoline Inventories
The City does not keep perpetual records for
inventories.
Criteria
The City needs to keep perpetual records for
inventories.
Effect
The effect of not being able to produce an
accurate listing of fleet maintenance and
gasoline inventones could result in the loss of
inventory through theft and other
misappropriation. Valuation of inventory assets
in the City's financial statements is a related
problem.
Recommendation
The City should gain the appropriate training
and understanding of the H T.E software
associated with the inventory and motor fleet
maintenance inventory modules and related
interaction with the general ledger module.
Physical inventory counts should be reconciled
to inventory listings periodically.
9
CITY OF PEARLAND, TEXAS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS (continued)
FOR THE YEAR ENDED SEPTEMBER 30, 1999
FINDINGS
FINANCIAL
(continued)
RELATED
TO
STATEMENTS
Related
to Internal
Controls
- Financial Statements
(continued)
Findings
Reportable
Conditions
(continued)
Reportable
Accounting
Maintenance
#99-3
Grant
of Separate
The
each
City
federal
does
and/or
not
grant.
separate
funds
for
Condition
and
state
maintain
Funds
Criteria
Grant
accurately
expenditures
accounting
account
associated
requires
for
all
revenues
with
the
the
City
grant.
to
and
be
able
to
The
state
grant
lack
grant
revenues
expenditures.
of
separate
could
and
result
funds
inappropriate
in
for
each
reporting
federal
and
of
Effect
misappropriating
grant
Recommendation
report
The
each
City
grant
grant
should
in order
revenue
establish
to
and
accurately
expenditures.
separate
track
funds
for
and
Material
Weaknesses
Material
P.E.D.C.
Weakness
Capital
#99-4
Accounting
for
The
as
fund
both
City
assets.
records
general
fixed
P.E.D.C.
assets
capital
and
expenditures
as
P
D
C
E
Expenditures
Criteria
Since
become
the
P
governmental
general
D
the
city
C
P.E
fund
asset
capital
they
account
be
should
accounted
asset
group.
purchases
be
reported
for
The
as
a
will
in
D.C.
should
fund.
assets,
fixed
E
The
included
instead
Group.
City's
on
of
capital
a
in
the
governmental
General
assets
are
overstated
fund
Assets
balance
and
sheet
Account
are
Effect
Fixed
Recommendation
The
City
should
accrual
in
Group.
the
report
City's
basis
the
and
General
P.E.D.C.
report
asset
on
Asset
the
modified
additions
Account
Fixed
10
CITY OF PEARLAND, TEXAS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS (continued)
FOR THE YEAR ENDED SEPTEMBER 30, 1999
FINDINGS RELATED TO FINANCIAL STATEMENTS (continued)
Findings Related to Internal Controls - Financial Statements (continued)
Material Weaknesses (continued)
Material Weakness #99-5 Physical Inventory
of Equipment, Other Fixed Assets, &
Capitalization Level
The City's asset capitalization policy is $1,000
and the last physical inventory count of fixed
assets was taken prior to fiscal year end 1998.
Criteria
The City needs a good physical inventory count
of fixed assets, and a capitalization policy that
reflects the tracking and recording of fixed
assets in a cost-effective manner.
Effect
The effect of not taking a good physical
inventory count of fixed assets could result in
an incomplete listing of physical assets on hand,
purchased or constructed. The effect of not
increasing the capitalization policy could result
in possible misclassification of fixed asset
additions, and cumbersome procedures
regarding fixed asset records.
Recommendation
The City should obtain a good physical count of
fixed assets on hand. Outsourcing of this
activity should be considered We also
recommend that the City increase their
capitalization policy to $5,000.
11
CITY OF PEARLAND, TEXAS
STATUS OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
PROGRAM
STATUS OF PRIOR YEAR'S FINDING
Compliance Findings — Financial
Statements
None Noted.
Reportable Conditions — Financial Statements
Reportable Condition #98-1 Monthly and
Year End Close Out Procedures
The City has implemented monthly and year
end close out procedures which are being
completed in a timely manner.
Reportable Condition #98-2 Adopting an
Inventory System
This is still a problem - See current year
comment 99-2.
Reportable Condition #98-3 H.T.E. System
and Training
City employee's required to utilize the H.T.E.
system have obtained adequate training and
knowledge of the system s capabilities to
effectively operate and obtain useful reports on
a day to day basis, as well as monthly,
quarterly and yearly basis.
Reportable Condition #98-4 Training on
New Accounting Procedures
The City has provided traimng on
implementing new procedures and has
monitored the progress and provided necessary
assistance in adhering to the procedures
Material Weaknesses — Financial
Statements
None.
Compliance Findings — Federal
•
None Noted.
Internal Control — Federal
None Reported.
12
CITY OF PEARLAND, TEXAS
CORRECTIVE ACTION PLAN
FOR THE YEAR ENDED SEPTEMBER 30,1999
For All Items:
Contact Person:
Mr. Jim Causey — Director of Finance - Phone No. (281) 652-1762.
Estimated Completion Date:
During the 1999-2000 fiscal year
SCHEDULE REFERENCE NUMBER /
DESCRIPTION
CORRECTIVE ACTION PLAN
Compliance Finding #99-1 Delinquent
Tax Receipts Regarding the Debt Service
Fund
We agree with the compliance finding. We have
taken steps to correct these allocations beginning
with the start of the 1999-2000 fiscal year.
Reportable Condition #99-2 Motor Fleet
and Gasoline Inventories
We agree with the internal control finding. A
review has been started to determine the most cost-
effective method for tracking these inventories. We
plan to have an inventory tracking procedure in
place as soon as possible.
Reportable Condition #99-3 Grant
Accounting and Maintenance of Separate
Funds
We agree with the internal control finding. Separate
funds will be estabhshed for each federal and state
grant received.
Material Weakness #99-4 Accounting for
P.E.D.C. Capital Expenditures
Material Weakness #99-5 Physical
Inventory of Equipment, Other Fixed
Assets, & Capitalization Level
We agree with the internal control finding. The
P E D C will be accounted for as a governmental
fund beginning with the 1999-2000 fiscal year. All
capital expenditures will be accounted for in the
City's General Fixed Assets Account Group.
We agree with the internal control finding. The City
will make arrangements to obtain a good physical
count of fixed assets on hand. Outsourcing of this
activity is being considered We will increase our
fixed assets capitalization policy to $5,000.