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HomeMy WebLinkAbout08262024 City Council Laydown - Audit Letter to Governing Boardr CITY OF SEWARD, ALASKA Letter to the Governing Board Year Ended December 31, 2023 Altman, Rogers RTIFIED PUBLIC Co. CEACCOUNTANTS CITY OF SEWARD, ALASKA Letter to the Governing Board Year Ended December 31, 2023 Altman, Rogers CERTIFIED Co.6z ACCOUPUBLICNTANTS July 31, 2024 Honorable Mayor and City Council City of Seward Seward, Alaska We have audited the financial statements of the governmental activities, business -type activities, each major fund, and the aggregate remaining fund information of City of Seward, Alaska, as of and for the year ended December 31, 2023, and the related notes to the financial statements, which collectively comprise City of Seward's basic financial statements. We did not audit the financial statements of the Providence Seward Medical and Care Center (PSMCC) which represent 39%, 28%, and 98%, respectively, of the assets and deferred outflows of resources, net position, and revenues of the Healthcare Facilities Enterprise Fund, and 8%, 4%, and 56%, respectively, of the assets and deferred outflows of resources, net position, and revenues of the business -type activities. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the financial statements of the PSMCC, is based solely on the report of the other auditors. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated January 25, 2024. Professional standards also require that we communicate to you the following information related to our audit. Significant Accounting Policies and Transactions Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City of Seward are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2023. We noted no transactions entered into by the City of Seward during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. 3000 C Street N. Suite 201 Anchorage, Alaska 99503 Offices in Juneau and Soldotna A Professional Corporation Phone 907-274-2992 Fax 907-274-2993 Members of the City Council City of Seward Page 2 of 4 Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City's financial statements were: Governmental Activities and Business -type Activities Opinion Units Management's estimate of the useful lives and depreciation is based upon the expected life of an asset. We evaluated the key factors and assumptions used to develop the useful lives and depreciation expense in determining that it is reasonable in relation to the financial statements taken as a whole. Management's estimate of the City's proportionate share of the collective net pension and other postemployment benefits (OPEB) liabilities, assets, and related deferred outflows and inflows of resources are based on information furnished by the State of Alaska and actuarial reports generated during the audit of the Public Employees' Retirement System. The amortization of these deferrals is based on guidance provided by the Governmental Accounting Standards Board. We evaluated the key factors and assumptions used to develop the estimates of the City's proportionate share of the collective net pension and OPEB liabilities and deferred outflows and inflows of resources and related amortization in determining that it is reasonable in relation to the financial statements as a whole. Management's estimate of the calculation of the lease receivable is based on an estimated incremental borrowing rate for the tenants for the present value calculation of the lease payments. We evaluated the key factors and assumptions used to develop the present value calculation in determining that it is reasonable in relation to the financial statements as a whole. All Opinion Units Management's estimate of the allowance account on accounts receivable is based on historical collections and collectability of customer balances. We evaluated the key factors and assumptions used to develop the allowance account in determining that it is reasonable in relation to the financial statements taken as a whole. Financial Statement Disclosures The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Members of the City Council City of Seward Page 3 of 4 Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. During the course of our audit we noted the following misstatements that have been corrected by management: • $1,069,763 to accrue accounts payable and associated expenses across multiple funds. • $202,017 to recognize the changes in the PERS net pension/OPEB assets, liabilities, and deferred inflows and outflows in the Enterprise Funds. • $681,191 to account for current year capital asset additions in the Electric Enterprise Fund. • $107,071 to accrued accounts receivable and revenue sharing revenue in the General Fund. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated July 31, 2024. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit's financial statements or a determination of the type of auditors' opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Internal Control See the December 31, 2023 Compliance Reports for the definition and description of deficiencies, significant deficiencies, material weaknesses and any reported findings. Accounting Assistance As part of our engagement, we assisted management in the drafting of the basic financial statements of the City from the City's accounting records; however, management of the City was involved in the drafting process and retains responsibility for the basic financial statements. Members of the City Council City of Seward Page 4 of 4 Supplementary Information Accompanying the Financial Statements We applied certain limited procedures to the Management Discussion and Analysis (MD&tA), Budgetary Comparison Schedules, Schedules of the City's Proportionate Share of the Net Pension and OPEB Liabilities (Assets) and Contributions for the Public Employees' Retirement System and International Brotherhood of Electrical Workers Plan, and Notes to Required Supplementary Information, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the "Supplementary Information", which includes the combining and individual fund financial statements and schedules, which accompany the financial statements but are not RSI. With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were not engaged to report on the Introductory Section, Supplementary Bond Schedules, and Statistical Section, which accompany the financial statements but are not RSI. This information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Major Issues Discussed with Management Prior to Retention We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Restriction on Use This information is intended solely for the use of City Council and management of the City of Seward and is not intended to be and should not be used by anyone other than these specified parties. Sincerely, Anchorage, Alaska