9. Reports of Independent Public Accountants & Schedule of Expenditures of Federal AwardsREPORTS OF INDEPENDENT
PUBLIC ACCOUNTANTS AND
SCHEDULE OF EXPENDITURES OF
FEDERAL AWARDS
AS REQUIRED BY U.S. OFFICE OF MANAGEMENT AND
BUDGET CIRCULAR A-133, AUDITS OF STATE AND
LOCAL GOVERNMENTS AND NON-PROFIT
ORGANIZATIONS
City of Kalispell, Flathead County, Montana
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For Fiscal Year Ended June 30, 2013
Ending
Federal Grantor/Pass-Through
Federal
Pass -Through
Award
Beginning Bal
Federal
Match/Other
Federal
Match/Other
Balance
Grantor/Program Title
CFDA #
Grantees #
Amount
July 1, 2012
Revenue
Revenue
Expenditures
Expenditures
June 30, 2013
U.S. Department of Housing and Urban Development
Passed thru the State Dept. of Commerce
COB G/State's Program- Neighborhood Stabilization Program
14228
MT-NSP-007-01-001
$4,000,000
$
22,235
$
22,235
COB G/State's Program- Neighborhood Stabilization Program
14228
MT-NSP-007-01-001
$1,500,000
$
799,982
$
799,982
CDBG- FVCC Training Program
14.228
MT-CDBG-ED09-04
$ 273,945
$
66,119
$
66,119
Total U. S. Department of Housing and Urban Development
$ -
$
888,336
$
-
$
888,336
$
U. S. Department of Transportation
Direct.
FAA - Airport Planning Grant
20.106
DOT-FAIONM-2032
$ 92,910
$
4,917
$
258
$
4,917
$
258
Passed thru the State Department of Transportation
Highway Planning and Construction
20.205
6770-110
$ 174,350
$
174,350
$
31,264
$
174,350
$
31,264
Highway Planning and Construction-CTEP
20.205
STPE6799(32,33)
$ 121,882
$
27,134
$
4,206
$
27,134
$
4,206
Safety Incentives to Prevent Operation of Motor Vehicles by Intoxicated Pem
20.601
106127
$ 20,000
$
10,146
$
10,146
Safety Incentives to Prevent Operation of Motor Vehicles by Intoxicated Pem
20.601
106727
$ 20,000
$
12,335
$
12,335
Alcohol Traffic Safety and Drunk Driving Prevention Incentive/DUI Court In
20.601
CTS 106006
$ 97,000
$
20,940
$
9,452
$
20,940
$
9,452
State and Community Highway Safety/DUI Court Implementation
20.601
CTS 106687
$ 130,462
$
66,466
$
216
$
66,466
$
216
Total U. S. Department of Transportation
$ -
$
316,288
$
45,396
$
316,288
$
45,396
$ -
U. S. Department of Justice
Direct.
COPS Law Enforcement Technology -Shooting Facility
16.710
2009CKWX0478
$ 750,000
$
750,000
$
750,000
Drug Court Discretionary Grant Program
16.585
2009-DC-BX-0070
$ 348,473
$
14,440
$
14,440
Recovery Act - Community Policing Grants/COPS Hiring Recovery Program
16.710
2009RKWX0524
$ 214,229
$
52,470
$
21,980
$
52,470
$
21,980
Bullet Proof Vest
16.607
n/a
$ 8,789
$
3,662
$
30
$
3,662
$
30
Passed through Flathead County:
JAG Edward Byrne Memorial Justice Asst. -NW Drug Taskforce
16.738
11-GO1-91260
$ 25,191
$
25,191
$
25,191
Total U. S. Department of Justice
$ -
$
845,763
$
22,010
$
845,763
$
22,010
$ -
U. S. Department of the Interior/National Park Service
Direct.
Preserve America -Kalispell Gets You Glacier
15.929
PIOAP00105
$ 75,000
$
9,696
$
9,696
$
9,696
$
9,696
Total U. S. Department of the Interior/National Park Service
$ -
$
9,696
$
9,696
$
9,696
$
9,696
$ -
U.S. Department of Homeland Security
Passed thru: Department of MilitaryAffarrs
Assistance for Firefighters Grants - Hurnat Tow Vehicle
97.044
EMW-2011-ss-00052, 2010-ss-TO-0089
$ 198,500
$
86,097
$
86,097
Narrowband Grant
97.044
2010-SS-TO-0089
$ 16,360
$
15,945
$
493
$
15,945
$
493
Direct.
Recovery Act- Station Construction Grant
97.115
EMW-2009-FC-01097R
$1,348,039
$
7,124
$
7,124
Recovery Act -SAFER Grant
97.083
EMW-2009-FH-00340
$ 457,887
$
127,204
$
127,204
Total U. S. Department of Homeland Security
$ -
$ 236,370
$
493
$
236,370
$
493
$ -
Environmental Protection Agency
Direct.
Recovery Act - Brownfields Revolving Loan Program
66.818
BF-96807701-0
$ 1,000,000
$
3,167
$
3,167
Recovery Act - Brownfields Area -Wide Planning Pilot Program
66.814
TR96808401
$ 175,000
$
89,685
$
30,000
$
89,685
30000
Recovery Act - Brownfields Assessment and Cleanup Cooperative Agreemen
66.818
BF-97863001
$ 400,000
$
25,453
$
25,453
Total Environmental Protection Agency
$ -
$
118,305
$
30,000
$
118,305
$
30,000
$ -
Executive Office of the President
Passed through State of Montana -Board of Crime Control.
High Intensity Drug Trafficing Area
95.001
GI 1RM0035A, G1211, G13R
$ 4,367
$
4,367
$
4,367
Total Executive Office of the President
$ -
$
4,367
$
-
$
4,367
$
-
$ -
Total Federal Assistance
$ -
$2,419,125
$
107,595
$
2,419,125
$
107,595
$ -
CITY OF KALISPELL
NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Fiscal Year Ended June 30, 2013
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.
142
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A PROFESSIONAL CORPORATION OF
CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS x x x/H h. c�Udpn
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
City Council Members
City of Kalispell, Montana
Compliance
We have audited the compliance of City of Kalispell, Montana with the types of compliance requirements
described in the U.S. Office of Management and Budget Circular A-133 Compliance Supplement that could
have a direct and material effect on each of its major federal programs for the year ended June 30, 2013. 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.
Management's Responsibility
Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major
federal programs is the responsibility of the entity's management.
Auditor's Responsibility
Our responsibility is to express an opinion on the City's compliance with the applicable compliance
requirements 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 U.S. Office of Management and
Budget Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations. Those
standards and 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.
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143
Opinion
In our opinion the 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, 2013.
Internal Control over Compliance
The management of the City of Kalispell is responsible for establishing and maintaining effective internal
control over compliance with the 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 as a
basis for designing our auditing procedures for the purpose of expressing our opinion on compliance and to
test and report on internal control over compliance in accordance with 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. A 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.
Restricted Use
The purpose of this report is solely to describe the scope of our testing of internal control over financial
reporting and compliance, and the result of that testing, and not to provide an opinion on the effectiveness of
the entity's internal control over financial reporting or on compliance. This report is an integral part of an
audit performed in accordance with Government Auditing Standards in considering the entity's internal
control over financial reporting and compliance. Accordingly, this report is not suitable for any other purpose
GALUSHA, HIGGINS & GALUSHA, PC
Certified Public Accountants and Advisors
Helena, Montana
February 28, 2014
144
CITY OF KALISPELL
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
For the year ended June 30, 2013
SECTION I - SUMMARY OF AUDITOR'S RESULTS
Financial Statements
Type of auditor's report issued: Unmodified
Internal control over financial reporting:
Material weakness(es) identified? x yes no
Significant deficiency(ies) identified not
considered to be material weaknesses? yes x none reported
Noncompliance material to financial
statements noted? yes x no
Federal Awards
Internal Control over major programs:
Material weakness(es) identified? yes x no
Reportable condition(s) identified not
considered to be material weaknesses? yes x none reported
Type of auditor's report issued on compliance for major programs: Unmodified
Any audit findings disclosed that are
required to be reported in accordance with
Circular A-133, Section .510(a)? yes x no
Identification of major programs:
CFDA Numbers(s) Name of Federal Program or Cluster
U.S. Department of Housing and Urban Development
14.228 Community Development Block Grant Program
U.S. Department of Justice
Public Safety Partnership and Community
16.710 Policing Grants
U.S. Department of Homeland Security
ARRA Staffing for Adequate Fire and Emergency
97.083 Response (SAFER)
Dollar threshold used to distinguish between
Type A and Type B programs: $300,000
Auditee qualified as low -risk auditee? x yes no
SECTION II - FINANCIAL STATEMENTS
Yes
SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
None
145
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A PROFESSIONAL CORPORATION OF
CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS x x x/h h. c�Uo
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE
AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS
To the City Council Members
City of Kalispell, Montana
We have audited, 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, the financial statements of the governmental activities, the
business -type activities, the aggregate discretely presented component units, each major fund, and the
aggregate remaining fund information of the City of Kalispell as of and for the year ended June 30, 2013, and
the related notes to the financial statements, which collectively comprise the City of Kalispell's basic
financial statements, and have issued our report thereon dated February 28, 2014.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City of Kalispell's
internal control over financial reporting (internal control) to determine the audit procedures that are
appropriate in the circumstances 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.
Accordingly, we do not express an opinion on the effectiveness of the City of Kalispell's internal control.
Our consideration of internal control over financial reporting was for the limited purpose described in the
preceding paragraph and was not designed to identify all deficiencies in internal control over financial
reporting that might be material weaknesses or significant deficiencies and therefore, material weaknesses or
significant deficiencies may exist that were not identified. However, as described in the accompanying
schedule of findings and questioned costs, we identified certain deficiencies in internal control that we
consider to be material weaknesses.
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 a combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the entity's
financial statements will not be prevented, or detected and corrected on a timely basis. We consider the
deficiency described in the accompanying schedule of findings and responses as item 2013-001 to be a
material weakness.
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146
Compliance and Other Matters
As part of obtaining reasonable assurance about whether City of Kalispell 's financial statements are free
from 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.
City of Kalispell's Response to Findings
The City of Kalispell's responses to the findings identified in our audit are described in the accompanying
schedule of findings and responses. The City of Kalispell's response was not subjected to the auditing
procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and
the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or
on compliance. This report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering the entity's internal control and compliance. Accordingly, this communication is
not suitable for any other purpose.
GALUSHA, HIGGINS & GALUSHA, PC
Certified Public Accountants and Advisors
Helena, Montana
February 28, 2014
147
City of Kalispell
SCHEDULE OF FINDINGS AND RESPONSES
For the Fiscal Year Ending June 30, 2013
2013-001 —Deferred Revenue, Loan Receivable
Criteria: Deferred revenues represent revenues that have been collected but not yet earned. Principal
repayments of loans are not considered to be income and would not be offset by a deferred revenue balance.
Additionally, interest payments received from the principal balance are considered earned and would not
require a deferral.
Condition: The City of Kalispell included loan receivable principal amounts as deferred revenue in the
government -wide financial statements.
Cause: When the City of Kalispell converted from a modified accrual basis of accounting to full accrual in
2003, the previous finance director offset the loan principal and interest receivable with a deferred revenue
balance. During the year-end closing process there does not appear to be a process for reviewing previously
recorded transactions and balances for compliance with accounting principles.
Effect: The City's liabilities were overstated by $1,185,128, which represents the balance of the deferred
revenue — loan receivable account.
Recommendation: We recommend that the City implement an annual review process for all significant
transactions and balances to determine if proper accounting principles were applied.
Management response: The City will implement an annual review process for all significant transactions and
balances to insure that proper accounting principles have been applied.
148
City of Kalispell
SCHEDULE OF PRIOR AUDIT RECOMMENDATIONS
For the Fiscal Year Ending June 30, 2013
The following recommendations were made during the prior audit. The status of the City's corrective action
was reviewed during the current audit and is reported as follows:
Prior Audit Recommendation
Finding 12-1 Credit Card Claims: The City provided guidance and reaffirmed policies to all departments,
including component units, regarding the documentation requirements
for credit card purchases.
149