City of San Gabriel January 2018

CITY OF SAN GABRIEL Audit Report SPECIAL GAS TAX STREET IMPROVEMENT FUND July 1, 2015, through June 30, 2016 BETTY T. YEE California State Controller January 2018 BETTY T. YEE California State Controller January 26, 2018 The Honorable Juli Costanzo Mayor of the City of San Gabriel 425 South Mission Drive San Gabriel, CA 91776 Dear Mayor Costanzo: The State Controller’s Office audited the City of San Gabriel’s Special Gas Tax Street Improvement Fund for the period of July 1, 2015, through June 30, 2016. 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 Efren Loste, Chief, Local Government Audits Bureau, by telephone at (916) 324-7226. Sincerely, Original signed by JEFFREY V. BROWNFIELD, CPA Chief, Division of Audits JVB/rg cc: Thomas C. Marston, Finance Director City of San Gabriel City of San Gabriel Special Gas Tax Street Improvement Fund Contents Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Objective, Scope, and Methodology ................................................................................. 1 Conclusion .......................................................................................................................... 2 Follow-up on Prior Audit Findings .................................................................................. 2 Views of Responsible Officials .......................................................................................... 3 Restricted Use .................................................................................................................... 3 Schedule 1—Reconciliation of Fund Balance ...................................................................... 4 City of San Gabriel Special Gas Tax Street Improvement Fund Audit Report Summary The State Controller’s Office (SCO) audited the City of San Gabriel’s Special Gas Tax Street Improvement Fund for the period of July 1, 2015, through June 30, 2016. 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. Objective, Scope, Our audit objective was 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, 2015, through June 30, 2016. To meet our objective, we:  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, and reviewing the city’s organization chart;  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 balances by performing a fund balance reconciliation for the period of July 1, 2006, through June 30, 2015, and by recalculating the trial balance for the period of July 1, 2015, through June 30, 2016;  Verified whether the components of and changes to the fund balances were properly computed, described, classified, and disclosed by -1- City of San Gabriel Special Gas Tax Street Improvement Fund 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 fiscal year (FY) 2015-16 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 all of the interest allocations for the audit period;  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 the audit period were supported by proper documentation and eligible in accordance with the applicable criteria by judgmentally selecting samples of transfers expenditures. For the selected sample, errors found were not projected to the intended population. We tested $390,767 of $887,303 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 accordance with the criteria. 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 objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. Conclusion Our audit found that the City of San Gabriel 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, 2015, through June 30, 2016. Follow-up on Prior Our prior audit report, for the period of July 1, 2005, through June 30, Audit Findings 2006, issued on August 29, 2007, disclosed no findings. -2- City of San Gabriel Special Gas Tax Street Improvement Fund Views of We discussed the audit results with the city during an exit conference on December 13, 2017. Shaoyin Wei, Financial Services Manager, agreed Responsible with the audit results. Ms. Wei further agreed that a draft audit report was Officials not necessary and that the audit report could be issued as final. Restricted Use This report is solely for the information and use of the City of San Gabriel 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 January 26, 2018 -3- City of San Gabriel Special Gas Tax Street Improvement Fund Schedule 1— Reconciliation of Fund Balance July 1, 2015, through June 30, 2016 -4- State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250-5874 http://www.sco.ca.gov C17-GTA-0023