9. Reports of Independent Public Accountants & Schedule of Expenditures of Federal AwardsREPORTS OF INDEPENDENT
PUBLIC ACCOUNTANTS ANII,
SCHEDULE OF EXPENDITURES OF
FEDERAL AWARDS
AS REQUIRED BY U.S. OFFICE OF MANAGEMENT AND
BUDGET CIRCULAR A- 13 3 . AUDITS OF STATE AND
LOCAL GOVERNMENTS AND NON-PROFIT
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CITY OF KALISPELL
NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Fiscal Year Ended June 30, 2012
Basis of Presentation
The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of City
of Kalispell, Flathead County, Montana, and is presented on the modified accrual basis of accounting. The
information in this schedule is presented in accordance with the requirements of OMB Circular A-133,
Audits of States, Local governments, and Non -Profit Organizations. Therefore, some amounts presented in
this schedule may differ from amounts presented in, or used in preparation of, the basic financial
statements.
141
Denning, Downey & Associates, P.C.
CER TIFIED P UBLIC A CCO U.NTANTS
1740 US Hwy 93 South, P.O. Box 1957, .Kalispell, MT ;59903-19.57
REPORT ON INTERNAL CONTROL OVER FINANCIAL RE PORTING AND ON 7ND N'
0
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
U IT
I
STATEMENTS PERFORMED IN ACCORDANCE WITH GOVEM�IVMENTA D N
STANDARDS
Mayor and City Council
City of Kalispell
Flathead County
Kalispell, Montana
We have audited the financial statements of the governmental activities, business -type activities,
the aggregate discretely presented component units,, each major fund, and the aggregate
remaining fund information of City of Kalispell, Flathead County-, Montana, as, of and for the
year ended June 30, 2012, which collectively comprise the City of Kalispell's basic, financial
statements and have 'Issued our report thereon dated December 28-, 2012. We conducted our
audit in accordance with auditing standards generally accepted in the United States of America
and the standards applicable to financial audits. contained in. Government Auditing Standards,
issued by the Comptroller General of the United States.
Intornal Control Over Financial _.Reporting
Management of City of Kalispell is responsible for establishing and maintaining effective
internal control over financial reporting. In planning and performing our audit, we considered
the City of Kalispell 'Internal control over financial. reporting as a basis for designing our auditing
procedures for the purpose of expressing our opinions on the financial statements, but not for the
purpose, of expressing -an opinion on the effectiveness of the City of Kalispell's 'internal control
over financial reporting, Accordingly, we do, not express an opinion on the effectiveness -of the
City of Kalispell's internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent,, or detect and correct misstatements on a timely basis. A material weakness is a
deficiency, or acombination of deficiencies, in, Internal control such that there is a reasonable
possibility that a material misstatement of the entity's financial statement will not beprevented,
or detected and corrected on a timely basis.
Our consideration of internal control over financial reporting was for the limited purpose
described in the first paragraph of this section and was not designed to identify all deficiencies in
internal control over financial reporting that might be deficiencies, significant deficiencies, or,
material weaknesses, We did not identify any deficiencies in internal control over financial
reporting that we consider to be material weaknesses, as defined above. However, we identified
certain deficiencies in internal control over financial reporting, described in the accompanying
schedule of findings and questioned costs that we consider to be significant deficiencies in
internal control over financial reporting as 'item 12-1,
- 142-
Robert K Denning, CPA - Kim M Downey, CPA
A significant dqflciency is a deficiency, or a combination of deficiencies, in internal control that
is less severe than a material weakness, yet important enough to merit attention by those charged
with governance..
'Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City of Kalispell's financial
statements are free of material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, contracts and grant agreements, 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 no 'Instances of
noncompliance or other matters- that are required tobe reported under Government Auditing
Standards,
City of Kalispell's response to the findings identified in our audit is described bed in the Auditee's
Response to Findings, We did not audit City of Kalispell's response, and accordingly, we
express no opinion on it.
This report is intended solely for the 'Information and use of management,, the Mayor and City
Council, the Montana Department of Administration, and federal awarding agencies and pass -
through entities and is not intended to be and should not be used by anyone other than these
specified parties.
December 28, 2012
-143-
Denning, Downe & Associates, P.C.
Y
CER TIFIED P UBLIC A CCO UNTANTS
1740 Z.I. S. Hwy 93 South, P. O. Box 195 7, Kalispell, MT 59903-195 7
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS
THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR
PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN
ACCORDANCE WITH OMB CIRCULAR A-133
Mayor and City Council
City of Kalispell
Flathead County
Kalispell, Montana
^ C%
CoMpliance
We have audited City of Kalispell, Flathead County, Montana, compliance with the types of
compliance requirements described in the U.S. Office of Management and Budget (OMB)
Circular A-133 Compliance Supplement that could have a direct and material effect on each of
City of Kalispell's major federal programs for the year ended June 30, 2012. 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's management. Our responsibility is to express an opinion of the City's
compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted
in the United States of America; 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, City of Kalispell complied, in all material respects, with the compliance
requirements referred to above that could have a direct and material effect on each of its major
federal programs for the year ended June 30, 2012.
ZN 'Cl
Internal Control Over Compliance
The management of the City 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
144
Robert K Denning, CPA - Kim M Downey, CPA
expressing our opinion on compliance and to test and re -port on internal control over compliance
in accordance with OMB Circular A- 133, but not for the purpose of expressing an opinion on the
effectiveness of internal control over compliance. Accordingly, we do not express an opinion on
the effectiveness of the City's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control
over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent, or detect and correct,, noncompliance with a type of
compliance requirement of a federal program on a timely basis.. material weakness in internal
control over compliance is a deficiency, or combination of deficiencies, in internal control over
compliance, such that there is a reasonable possibility that material noncompliance with a type of
compliance requirement of a federal program will not be prevented, or detected and corrected, on
a timely basis.
Our consideration of internal control over compliance was for the limited purpose described in
the first paragraph of this section and was not designed to identify all deficiencies in internal
control over compliance that might be deficiencies, significant deficiencies, or material
weaknesses. We did not identify any deficiencies in internal control over compliance that we
consider to be material weaknesses, as defined above.
This report is intended for the information of management, the Mayor and City Council, the
Montana Department of Administration, and federal awarding agencies and pass -through entities
and is not intended to be and should not be used by anyone other than these specified parties.
IS�Ex;u,,�,, wrvcvw„ r „� G.;ku-ecut�� , CPR s, r�C.
December 28, 2012
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Fiscal •. Ended June 30, 2012
Section I — Summary of Auditor's Results
Financial Statements
Type of auditor's report issued Unqualified
Internal control over financial reporting:
Material weakness(es) identified? No
Significant deficiency(s) identified
not considered to be material weaknesses Yes
Noncompliance material to financial statements
noted? No
Federal Awards
Internal control over major programs:
Material weakness(es) identified? No
Significant deficiency(s) identified
not considered to be material weaknesses None Reported
Type of auditor's report issued on compliance
for major programs: Unqualified
Any audit findings disclosed that are required
to be reported in accordance with
Circular A-133, Section.510(a)? No
Identification of major programs:
CFDA Number Name of Federal Program or Cluster
16.753 BJA Congressionally Selected
97.036 Disaster Grants
Dollar threshold used to distinguish
between Type A and Type B programs: $ 30000
Auditee qualified as low -risk auditee? Yes
OTV 101 Mwlli 111111UMU! 001 11
Section 11 — Financial Statement Findings
12-1 Credit Card Claims
Condition:
Based on the review of credit card claims, of the 25 individual credit card statements and
supporting documentation provided, 7 of the billing statements did not have appropriate
supporting documentation.
Criteria:
Proper controls should be in place to ensure credit card purchases are supported with
proper documentation.
Effect:
Controls over credit card disbursements could be improved.
Cause:
Controls in place were not being followed on a consistent basis.
Recommendation:
All credit card purchases should be supported with adequate documentation including the
original receipts.
Section III — 'Federal Award Findings and Questioned Costs
There were no federal award findings or questioned costs reported.
4-1
Denning, Downe & Associates, P.C.
Y
CER TIFIED P UBLIC A CCO UNTANTS
1740 U.S. Hwy 93 South, P.O. Box 1957, Kalispell, MT59903-1957
REPORT ON OTHER COMPLIANCE, FINANCIAL, AND INTERNAL ACCOUNTING
CONTROL MATTERS
Mayor and City Council
City of Kalispell
Flathead County
Kalispell, Montana
There were no other compliance, financial, or internal accounting matters.
filla�.� �La� C Pn s,Pc
December 28, 2012
Denning, Downe & Associates, P.C.
Y
CEJ? TIFIED P UBLIC A CCO UNTANTS
1740 U. S. Hwy 93 South, P. O. Box 195 7, Kalispell, MT 59903-195 7
Mayor and City Council
City of Kalispell
Flathead County
Kalispell, Montana
The prior audit report contained two recommendations. The action taken on each
recommendation is as follows:
Recommendation
Parking Commission Segregation of Duties
Ambulance Fund Receivables
December 28,, 2012
Action Taken
Implemented
Not Repeated
149
Robert K Denning, CPA - Kim M. Downey, CPA
City of Kalispell, Montana
Response to Audit Findings
Fiscal Year 2012
12-1 Credit Card Claims
Condition:
used on the review of credit card claims,, of the 25 individual credit card statements and
supporting documentation provided, 7 of the billing statements did not have appropriate
supporting documentation.
Criteria:
Proper controls should be m* place to ensure credit card purchases are supported with
proper documentation.
Effect:
Controls over credit card disbursements could be improved.
Cause:
Controls in place were not being followed on a consistent basis.
Recommendation:
All credit card purchases should be supported with adequate documentation including the
original receipts.
Response:
All departments, including component,, units will be required to provide adequate
documentation including the original receipts for all credit card purchases.
WO