City of Grass Valley September 2016

CITY OF GRASS VALLEY Audit Report SPECIAL GAS TAX STREET IMPROVEMENT FUND July 1, 2014, through June 30, 2015 BETTY T. YEE California State Controller September 2016 BETTY T. YEE California State Controller September 29, 2016 The Honorable Jason Fouyer Mayor of the City of Grass Valley 125 East Main Street Grass Valley, CA 95945 Dear Mayor Fouyer: The State Controller’s Office audited the City of Grass Valley’s Special Gas Tax Street Improvement Fund for the period of July 1, 2014, through June 30, 2015. Our audit found that the city accounted for and expended its Special Gas Tax Street Improvement Fund in compliance with requirements, and that no adjustment to the fund is required. If you have any questions, please contact Christopher Lek, Interim Chief, Local Government Audits Bureau, by telephone at (916) 284-0120. Sincerely, Original signed by JEFFREY V. BROWNFIELD, CPA Chief, Division of Audits JVB/as cc: Mette Richardson, Finance Director City of Grass Valley City of Grass Valley Special Gas Tax Street Improvement Fund Contents Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Objectives, Scope, and Methodology ............................................................................... 1 Conclusion .......................................................................................................................... 2 Follow-Up on Prior Audit Findings ................................................................................. 3 Views of Responsible Officials .......................................................................................... 3 Restricted Use .................................................................................................................... 3 Schedule 1—Reconciliation of Fund Balance ...................................................................... 4 City of Grass Valley Special Gas Tax Street Improvement Fund Audit Report Summary The State Controller’s Office (SCO) audited the City of Grass Valley’s Special Gas Tax Street Improvement Fund for the period of July 1, 2014, through June 30, 2015. Our audit found that the city accounted for and expended its Special Gas Tax Street Improvement Fund in compliance with requirements, and that no adjustment to the fund is required. Background The State apportions funds monthly from the Highway Users Tax Account (HUTA) in the Transportation Tax Fund to cities and counties for the construction, maintenance, and operation of local streets and roads. The highway users taxes derive from State taxes on the sale of motor vehicle fuels. In accordance with Article XIX of the California Constitution and Streets and Highways Code, a city must deposit all apportionments of highway users taxes in its Special Gas Tax Street Improvement Fund. A city must expend gas tax funds only for street-related purposes. We conducted our audit of the city’s Special Gas Tax Street Improvement Fund under the authority of Government Code section 12410. Objectives, Scope, Our audit objectives were to determine whether the city accounted for and and Methodology expended its Special Gas Tax Street Improvement Fund in compliance with Article XIX of the California Constitution and the Streets and Highways Code. We audited the city’s Special Gas Tax Street Improvement Fund for the period of July 1, 2014, through June 30, 2015. To meet the objectives, we performed the following:  Gained a limited understanding of internal controls that would have an effect on the reliability of the accounting records of the Special Gas Tax Street Improvement Fund by interviewing key personnel, completing the internal control questionnaire, reviewing the city’s organization chart, and assessing the reliability of computer-processed data;  Conducted a risk assessment to determine the nature, timing, and extent of substantive testing;  Performed analytical procedures to determine and explain the existence of unusual or unexpected account balances;  Verified the accuracy of the fund balance by performing a fund balance reconciliation for the period of July 1, 2005 through June 30, 2014, and by recalculating the trial balance for the period of July 1, 2014, through June 30, 2015; -1- City of Grass Valley Special Gas Tax Street Improvement Fund  Verified whether the components of and changes to the fund balances were properly computed, described, classified, and disclosed by scheduling and analyzing the Special Gas Tax Street Improvement Fund account balances;  Reconciled the fund revenue recorded in the city ledger to the balance reported in the SCO’s apportionment schedule for FY 2014-15 to determine whether HUTA apportionments received by the city were completely accounted for;  Reviewed city accruals and adjustments for validity and eligibility;  Analyzed the system used to allocate interest and determined whether the interest revenue allocated to the Special Gas Tax Street Improvement Fund was fair and equitable, by interviewing key personnel and recalculating a sample of interest allocations;  Reviewed the fund cash and liabilities accounts for unauthorized borrowing to determine whether unexpended HUTA funds were available for future street-related expenditures and protected from impairment; and  Verified whether the expenditures incurred during FY 2014-15 were supported by proper documentation and eligible in accordance with applicable criteria by testing 100% of the expenditure transactions that were equal to or greater than the significant item amount (calculated based on materiality threshold), and selecting samples of other transactions based on our judgment (for the selected sample, errors found will not be projected to the intended population). We tested $92,160 of $203,460 in total transfers. We did not audit the city’s financial statements. We limited our audit scope to planning and performing audit procedures necessary to obtain reasonable assurance that the city accounted for and expended its Special Gas Tax Street Improvement Fund in compliance with requirements. We considered the city’s internal controls only to the extent necessary to plan the audit. We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Conclusion Our audit found that the City of Grass Valley accounted for and expended its Special Gas Tax Street Improvement Fund in compliance with Article XIX of the California Constitution and the Streets and Highways Code for the period of July 1, 2014, through June 30, 2015. -2- City of Grass Valley Special Gas Tax Street Improvement Fund Follow-Up on Prior Our prior audit report, issued on December 23, 2005, disclosed no Audit Findings findings. Views of We discussed the audit results with city representatives during an exit conference on July 27, 2016. Mette Richardson, Finance Director, agreed Responsible with the audit results. Ms. Richardson further agreed that a draft audit Officials report was not necessary and that the audit report could be issued as final. Restricted Use This report is intended for the information and use of the City of Grass Valley and the SCO; it is not intended to be and should not be used by anyone other than these specified parties. This restriction is not intended to limit distribution of this report, which is a matter of public record. Original signed by JEFFREY V. BROWNFIELD, CPA Chief, Division of Audits September 29, 2016 -3- City of Grass Valley Special Gas Tax Street Improvement Fund Schedule 1— Reconciliation of Fund Balance July 1, 2014, through June 30, 2015 Special Gas Tax Street Improvement Fund 1 Beginning fund balance per city $ 791,938 Revenues 393,486 Total funds available 1,185,424 Expenditures (203,461) Ending fund balance per city 981,963 Ending fund balance per audit $ 981,963 ___________________________ 1 The city receives apportionments from the State HUTA, pursuant to Streets and Highways Code sections 2103, 2105, 2106, 2107, and 2107.5. The basis of the apportionments varies, but the money may be used for any street purpose. Streets and Highways Code section 2107.5 restricts apportionments to administration and engineering expenditures, except for cities with populations of fewer than 10,000 inhabitants. Those cities may use the funds for rights-of-way and for the construction of street systems. The city must deposit its HUTA apportionments in its Special Gas Tax Street Improvement Fund. -4- State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250-5874 http://www.sco.ca.gov S17-GTA-0004