CITY COUNCIL: Receive 2011 Audit Report

TO: MAYOR McCLOUD AND COUNCIL MEMBERS
FROM: JASON STILWELL, CITY ADMINISTRATOR
DATE: JANUARY 10, 2012
SUBJECT: RECEIVE 2011 AUDIT REPORT
Attached are the annual financial reports for year end June 30, 2011 prepared by the City's independent outside auditor. We are pleased to report the independent auditor is able to provide an unqualified opinion that the City's financial records and statements are fairly and appropriately presented, and in accordance with Generally Accepted
Accounting Principles (GAAP).

Staff worked closely with the auditor this year to assure he had the information necessary to complete the audit. Finance staff were responsive to the auditor's needs and I appreciate their efforts knowing the work that is required to have the City's financial records in order and available during the crunch of an annual audit. The auditor found a positive cash variance of $126,196 resulting from reconciliation of actual cash balances to the accounting system recorded fund balances. That variance is being analyzed and will be adjusted in the City's accounting system.

Given the budget reductions and staff changes the city needs to ensure that the core administrative functions of personnel and financial management are appropriately staffed and effective. It is important that the City Council and City Administrator determine the appropriate management of the organization. The top priority of the organization, as determined by my assessment of the organization and interview with management, is management and oversight of finance, human resources, information technology, risk management, benefit administration, and related assignments. In this time of budget austerity it is important to be selective in the management positions needed in the organization and assure the positions are the ones that will best enable the City organization to operate effectively so departmental staff can provide excellent service to the public.

Segmentation of responsibilities is important in any organization and especially so in Carmel given the staffing changes and differing role assignments. The City has a strong administrative core of staff in place with highly motivated individuals. They have assumed additional duties as staff turnover and reductions have occurred over the years.

There is a need and an opportunity to conduct a complete review of internal controls within the reporting and accounting structure, after the City fills the administrative position. Neither I nor the independent auditor has uncovered any misappropriation of assets or fraudulent financial reporting but we want to prevent the risk of such.

CITY OF CARMEL-BY-THE-SEA
California
Annual Financial Report
June 30, 2011