To: Honorable Mayor and Members of Town Council
From: Trish Muller, CPA, Finance Director
Title
Presentation of the 2018 Comprehensive Annual Financial Report (CAFR) and 2018 Popular Annual Financial Report (PAFR)
Body
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Executive Summary
Colorado state law and the Town of Castle Rock Home Rule Charter require an annual audit of the Town’s financial statements. The goal of an audit is to provide reasonable assurance that the financial statements of the Town are presented in conformity with generally accepted accounting principles. An independent firm of licensed certified public accountants must perform the audit. In accordance with this requirement, staff submits, for Council’s information and review, the Comprehensive Annual Financial Report (CAFR) of the Town for the year ended December 31, 2018 (Attachment B).
In 2018, the Town posted a Request for Proposal for auditing services, and staff selected BKD, LLP. The firm’s focus on the public sector provides a high level of expertise locally and backed by a national network of resources to provide professional services to the Town.
A representative from BKD, LLP will make a short presentation to address the following areas:
Annual Audit Process
• BKD, LLP issued a clean or unmodified opinion on the Town’s financial statements for the year ended December 31, 2018. In other words, the Town’s financial statements appear fairly stated in all material respects, in accordance with generally accepted accounting principles (GAAP).
• 2018 was the first year BKD, LLP performed the financial audit for the Town of Castle Rock. The Town commends them on their thoroughness and their high level of professionalism.
• Requirements under Office of Management and Budget (OMB) Uniform Guidance require an audit to include reporting on major federal award programs when Federal Grant funds received exceed $750,000 during the year. BKD, LLC performed the Single Audit for the Town for the year ended December 31, 2018 (Attachment C).
Comprehensive Annual Financial Report (CAFR)
• For the year ended December 31, 2018, the Town had a positive net income for the Town as a whole.
• The Town continued to experience improvement in its major revenues during 2018.
• Staff will submit the CAFR to the Government Finance Officers Association for consideration of the Certificate of Achievement for Excellence in Financial Reporting.
• The Castle Rock Urban Renewal Authority and The Festival Park Commons General Improvement District are included as blended component units, and the Castle Rock Downtown Development Authority is included as a discretely presented component unit.
• The Town received revised financial statements from Plum Creek Water Reclamation Authority (PCWRA) after the 2018 CAFR was completed that resulted in an immaterial entry that the Town passed on incorporating into the 2018 CAFR. This passing entry is noted in the Report to Governance (Attachment A) in the Uncorrected and Corrected Misstatements paragraph.
• The Town implemented accounting policies to adopt provisions of GASB 89, Accounting for Interest Cost Incurred before the End of a Construction Period.
Report to Governance
• As part of the 2018 financial statement audit, BKD, LLP reviewed the Town’s internal control structure and various policies and procedures of the Town. Auditors issue three levels of comments:
o Material Weaknesses - most severe level of comment noting that the internal control is not adequate to prevent significant misstatement or fraudulent activities.
o Significant Deficiencies - less severe, however, the internal control system is weak and the financial integrity may be compromised.
o Advisory Comments - suggestions to enhance an existing control structure or procedure.
• BKD, LLP reported two Significant Deficiencies resulting from the audit on the Town’s financial statements and communicated this in their Report to Governance (Attachment A).
o Restatement of Prior Year Financial Statements. The Town’s cash flow statements reconciled to cash and investments in the 2017 CAFR. The Town removed the investments as a restatement of prior year’s ending balance and reported only cash and cash equivalents in the cash flow statements presented for the year ended December 31, 2018.
o Accounting for Grants. Eligibility requirements of a grant from the Colorado Department of Transportation (CDOT) were met as of December 31, 2018; however, as the receivable was not collected within 60 days of year-end (the Town’s available period), the receivable and related deferred inflows of resources for amounts not received within the available period were not recorded in the Town’s transportation fund, and the receivable and revenue were not recorded in the Town’s government-wide financial statements.
• There were no findings reported as a result of the testing based on the requirements of the Uniform Guidance.
Popular Annual Financial Report (PAFR)
• The PAFR (Attachment D) provides an overview of the Town’s financial position as reported in the 2018 CAFR.
• Finance staff designs this report as an easily understandable version for the general public and other interested parties.
We would like to thank the Finance staff for their dedicated efforts in the preparation of the financial statements and in the audit process.
Attachments
Attachment A: Report to Governance Resulting from the 2018 Financial Statement Audit
Attachment B: 2018 Comprehensive Annual Financial Report (CAFR)
Attachment C: Single Audit for the Year Ended December 31, 2018
Attachment D: 2018 Popular Annual Financial Report (PAFR)
The Comprehensive Annual Financial Report (CAFR) and Popular Annual Financial Report (PAFR) for the Town for the year ended December 31, 2018 can also be found on the Town’s website at: <http://crgov.com/FinancialReports>