Agenda - Council - 07/12/1994 - Laserfiche WebLink

Home

ACCOUNTING AND REPORTING COMMENTS FUND STRUCTUI~, AND CLASSIFICATION As we had mentioned in our prior year's management report, we believe the City should review and possibly revise i~ fund structure and classification of fund types on a periodic basis. [ Governmental a~counting standards provide for various fund types to be used by state and local governmental uniits. These fund types include the General, Special Revenue, Capital Project, Debt Service, EnterpriSe, Internal Service, and Trust and Agency Funds. These fund types are defined loosely into broad categqries. In real life, it is often difficult to determine which fund type should be used for classifying a spedific fund because certain funds may have characteristics of more than one fund type. Trust and Agenc~ Funds are defined to include assets held in a trustee or agency capacity for others where spending iq controlled primarily through legal trust agreements and applicable state laws. Another basic concept in t~is classification is separating non-City financial activities into these fiduciary funds and aggregating primary City activi? into the Governmental and Enterprise Funds. Based on these definitions and concepts, mo~;t of the City s Expendable Trust Funds would be better classified as Special Revenue or Capital Projeci Funds with appropriate designated balances. We were also infc~rmed that the City is contemplating a separation of the sewer and water operations into two funds. We 1}elieve separating the operations is a good idea. This will provide you with better financial data as il[ relates to each operation for rate analysis and financial management. ACCOUNT DESCRIPTIONS The City's compt~terized accounting system provides for an account code description for each code established. Givc, n~ the significant number of account codes required to be used by the City, this description becomis essential for users of City generated financial reports. We observed that many codes did not have curreht, if any, descriptions assigned to them on the system. This not only makes it very difficult for us to ~tudit. the financial transactions, but also can cause inefficiencies and errors for regular users of the accoutering system. We suggest that the City review and update all of the account code descriptions and a!so eliminate unnecessary or duplicate codes. CONDITION OF FII~ANCIAL RECORDS We have observed ~a general improvement in the condition of the City's financial records. We have also seen specific improvements in such areas as the reconciliation and recording of deferred special assessments, the p~'eparation of a comprehensive annual financial report, and the balancing and analysis of financial data in}preparation for the audit. It is evident that ~the City has made significant progress this past year both financially and in accountab~hty. W~ commend the C~ty for the improvements made to the financial system, and we encourage the City'to continue to review and refine its accounting system and internal controls. -10-