HomeMy WebLinkAboutPACKET Audit Committee 2018-08-23
Thursday August 23, 2018 8:00 a.m. – 9:30 a.m.
Administration Conference Room
1. CALL TO ORDER
2. NEW BUSINESS
a) 2017 CAFR and Single Audit Review
i. Review 2017 Audit Report and Single Audit Findings with Auditors.
ii. Confirm readiness for September 11, 2018 Town Board presentation.
3. ADJOURN
Attachments:
Attachment A – Audit Wrap Up Communication
Attachment B – Beyond the Numbers Report
Attachment C – Management Letter
CAFR for year ended 12-31-2017 provided separately**
** Hard copies of the reports will be distributed at the meeting
AUDIT COMMITTEE
AGENDA
Town of Estes Park, Colorado
Audit Wrap Up
August 23, 2018
This presentation was prepared as part of our audit, has consequential
limitations, is restricted to those charged with governance and, if
appropriate, management, and is not intended and should not
be used by anyone other than those specified parties.
DATE
Attachment A - Audit Wrap Up Communication Page 1 of 15
August 23, 2018
Board of Trustees
Town of Estes Park, Colorado
170 MacGregor Avenue
Estes Park, Colorado 80517
Professional standards require us to communicate with you regarding matters related to the audit,
that are, in our professional judgment, significant and relevant to your responsibilities in
overseeing the financial reporting process. We presented an overview of our plan for the audit of
the financial statements of the Town of Estes Park, Colorado (the “Town”) as of and for the year
ended December 31, 2017, including a summary of our overall objectives for the audit, and the
nature, scope, and timing of the planned audit work.
This communication is intended to elaborate on the significant findings from our audit, including
our views on the qualitative aspects of the Town’s accounting practices and policies,
management’s judgments and estimates, financial statement disclosures, and other required
matters.
We are pleased to be of service to the Town and look forward to meeting with you on August 23,
2018 to discuss our audit findings, as well as other matters that may be of interest to you, and to
answer any questions you might have.
Respectfully,
Anton Collins Mitchell LLP
Attachment A - Audit Wrap Up Communication Page 2 of 15
Discussion Outline
Page
Status of Our Audit .................................................................................................... 3
Results of Our Audit ................................................................................................... 4
Internal Control Over Financial Reporting ........................................................................ 6
Other Required Communications ................................................................................... 7
Independence Communication ...................................................................................... 8
GASB Standards Effective in 2017 .................................................................................. 9
GASB Standards Effective in 2018 -2020 ......................................................................... 10
Attachment A - Audit Wrap Up Communication Page 3 of 15
3
AUDIT WRAP-UP – DECEMBER 31, 2017
Status of Our Audit
We have completed our audit of the financial statements and federal awards as of and for the year ended
December 31, 2017. Our audit was conducted in accordance with auditing standards generally accepted in
the United States of America and Government Auditing Standards. This audit of the financial statements
does not relieve management or those charged with governance of their responsibilities.
The objective of our audit was to obtain reasonable - not absolute - assurance about whether the
financial statements are free from material misstatements.
The scope of the work performed was substantially the same as that described to you in our earlier
Audit Planning communications.
We issued an unmodified opinion on the financial statements and released our report on July 31,
2018.
We issued a report on our consideration of the Town’s internal control over financial reporting and
compliance with certain provisions of laws, regulations, contracts, and grant agreements in
accordance with Government Auditing Standards and a report on the compliance with requirements
that could have a direct and material effect on each major program and on internal control in
accordance the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform
Guidance). We did not identify any deficiencies that we consider to be material weaknesses that could
have a direct and material effect on major federal programs for the year ended December 31, 2017.
Our responsibility for other information in documents containing the Town’s audited financial
statements does not extend beyond the financial information identified in the audit report, and we
are not required to perform procedures to corroborate such other information. However, in
accordance with professional standards, we have read the information included by the Town and
considered whether such information, or the manner of its presentation, was materially inconsistent
with its presentation in the financial statements. Our responsibility also includes calling to
management’s attention any information that we believe is a material misstatement of fact. We have
not identified any material inconsistencies or concluded there are any material misstatements of
facts in the other information that management has chosen not to correct.
All records and information requested by Anton Collins Mitchell LLP (“ACM”) were freely available for
our inspection.
Management’s cooperation was excellent. We received full access to all information that we
requested while performing our audit, and we acknowledge the full cooperation extended to us by
all levels of Town personnel throughout the course of our work.
Attachment A - Audit Wrap Up Communication Page 4 of 15
4
AUDIT WRAP-UP – DECEMBER 31, 2017
Results of Our Audit
ACCOUNTING PRACTICES, POLICIES, AND ESTIMATES
The following summarizes the more significant required communications related to our audit concerning
the Town’s accounting practices, policies, and estimates:
The Town’s significant accounting practices and policies are those included in Note 1 to the financial
statements. These accounting practices and policies are appropriate, comply with generally accepted
accounting principles and industry practice, were consistently applied, and are adequately described within
Note 1 to the financial statements.
There were no changes in significant accounting policies and practices during 2017.
Significant estimates are those that require management’s most difficult, subjective, or complex
judgments, often as a result of the need to make estimates about the effects of matters that are inherently
uncertain. The Town’s significant accounting estimates, including a description of management’s processes
and significant assumptions used in development of the estimates, are disclosed in Note 1 of the financial
statements.
Management did not make any significant changes to the processes or significant assumptions used
to develop the significant accounting estimates in 2017.
Primary Areas of Focus and Considerations and Findings
Revenue Recognition: The Town’s major source of revenues consists of property taxes, sales and
use taxes, intergovernmental grants and contributions, and charges for services. The Town records
revenues when earned. Property taxes are recognized as revenues in the year for which they are levied.
Grants and similar items are recognized as soon as all eligibility requirements imposed by the provider
have been met.
Accounts Receivable and Allowances: Accounts receivable represents amounts due from citizens
and businesses for property and sales taxes, customers for utilities and other governmental entities.
Capital Assets and Depreciation: Capital assets of the Town continue to be a significant area of
the financial statements. Accordingly, as part of the audit, we paid particular attention to the costs of
newly acquired assets, repairs and maintenance expenditures on existing capital assets, and the
depreciation expense of these assets.
Long-term Obligations: The Town currently has outstanding obligations consisting of a certificate
of participation, capital lease and lease purchase agreement in its governmental activities totaling
almost $9.1 million. In addition, the Town has light and water bonds and a water loan totaling almost
$7.2 million in its business-type activities. Accordingly, we have applied certain procedures over
balances, future maturities, and accrued interest associated with the applicable leases, along with
compliance with the lease agreements. It appears that the Town is properly accounting for these
obligations.
Pension Reporting: The Town has a defined benefit plan administered by the Public Employees’
Retirement Association of Colorado (“PERA”). The PERA plan is a multiple-employer defined benefit
plans. The Town has reported their proportionate share of the collective amounts for the plan as a
whole. In addition, changes in the net pension asset and net pension liability were recognized as
pension expense or reported as deferred outflows/inflows of resources depending on the nature of
change.
Attachment A - Audit Wrap Up Communication Page 5 of 15
5
AUDIT WRAP-UP – DECEMBER 31, 2017
Results of Our Audit
Evaluation of Going Concern: No going concern issues were noted during our audit.
Evaluation of Estimates: Estimates were determined to be reasonable and free of bias.
Single Audit Procedures: Because the Town expended more than $750,000 of federal grant funds,
the Town was subject to a single audit pursuant to the audit requirements of Title 2 U.S. Code of
Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards (“Uniform Guidance”). Accordingly, ACM performed procedures on
internal controls, and certain compliance requirements associated with the Town’s major federal
awards.
CORRECTED AND UNCORRECTED MISSTATEMENTS
Please refer to the schedule of corrected misstatements or Adjusting Journal Entries (“AJEs”).
Please refer to the schedule of uncorrected misstatements. We concur with management’s assessment that
the effects of not recording such adjustments are, both individually and in aggregate, immaterial to the
consolidated financial statements taken as a whole, considering both qualitative and quantitative factors.
QUALITY OF THE TOWN’S FINANCIAL REPORTING
A discussion was held regarding the quality of the Town’s financial reporting, which included the following:
Qualitative aspects of significant accounting policies and practices
Our assessment of critical accounting policies and practices
Our conclusions regarding significant accounting estimates
Significant unusual transactions
Financial statement presentation
New accounting pronouncements
Alternative accounting treatments
Attachment A - Audit Wrap Up Communication Page 6 of 15
6
AUDIT WRAP-UP – DECEMBER 31, 2017
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Town’s internal control
over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose
of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on
the effectiveness of the Town’s internal control. Accordingly, we do not express an opinion on the
effectiveness of the Town’s internal control.
Our consideration of internal control was for the limited purpose described above and was not designed to
identify all deficiencies in internal control that might be significant deficiencies or material weaknesses.
We are required to communicate, in writing, to those charged with governance all material weaknesses and
significant deficiencies that have been identified in the Town’s internal controls over financial reporting.
The definitions of control deficiency, significant deficiency and material weakness follow:
Category Definition
Deficiency in Internal
Control
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.
Significant Deficiency
A deficiency or 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.
Material Weakness
A deficiency or combination of deficiencies in internal control, such that
there is a reasonable possibility that a material misstatement of the
District’s financial statements will not be prevented, or detected and
corrected on a timely basis.
In conjunction with our audit of the financial statements, we noted the following material weakness:
Material Weakness Comments
Adjusting Journal Entry
During our testing, we noted that the Town had recorded $724,945
as both a reconciling item on its cash account and as an accounts
payable. As a result, cash was understated and the related expense
was overstated in the Town’s accounting records. We recommend
the Town implement a process over the review of significant
reconciling items on the bank reconciliations and year-end accruals
to ensure that amounts are properly recorded.
We have communicated to management of the Town, in a separate letter, control deficiencies that were
identified as a result of our audit that we did not consider to be material weaknesses or significant
deficiencies.
Attachment A - Audit Wrap Up Communication Page 7 of 15
7
AUDIT WRAP-UP – DECEMBER 31, 2017
Other Required Communications
Following is a summary of those required items, along with specific discussion points as they pertain to the
Town:
Requirement Discussion Points
Significant changes to planned
audit strategy or significant risks
initially identified
There were no significant changes to the planned audit strategy or
significant risks initially identified and previously communicated to
those charged with governance as part of our Audit Planning
communications.
Obtain information from those
charged with governance
relevant to the audit
There were no matters noted relevant to the audit, including, but not
limited to: violations or possible violations of laws or regulations; risk
of material misstatements, including fraud risks; or tips or complaints
regarding the Town’s financial reporting that we were made aware
of as a result of our inquiry of those charged with governance.
If applicable, nature and extent
of specialized skills or knowledge
needed related to significant
risks
There were no specialized skills or knowledge needed, outside of the
core engagement team, to perform the planned audit procedures or
evaluate audit results related to significant risks.
Consultations with other
accountants
We are not aware of any consultations about significant accounting
or auditing matters between management and other accountants
where we have identified a concern regarding such matters.
Our evaluation of the Town’s
relationships and transactions
with related parties and their
impact on the financial
statements
We have evaluated the Town’s process to identify, authorize and
approve, account for, and disclose its relationships and transactions
with related parties and noted no significant issues.
Disagreements with management There were no disagreements with management about matters,
whether or not satisfactorily resolved, that individually or in
aggregate could be significant to the Town’s financial statements or
to our auditor’s report.
Significant difficulties
encountered during the audit
There were no significant difficulties encountered during the audit.
If applicable, other matters
significant to the oversight of the
Town’s financial reporting
process, including complaints or
concerns regarding accounting or
auditing matters
There are no other matters that we consider significant to the
oversight of the Town’s financial reporting process that have not been
previously communicated.
Representations requested from
management
Please refer to the management representation letter.
Attachment A - Audit Wrap Up Communication Page 8 of 15
8
AUDIT WRAP-UP – DECEMBER 31, 2017
Independence Communication
Our engagement letter to you dated January 4, 2018 describes our responsibilities in accordance with
professional standards and certain regulatory authorities and Government Auditing Standards with regard
to independence and the performance of our services. This letter also stipulates the responsibilities of the
Town with respect to independence as agreed to by the Town. Please refer to that letter for further
information.
Attachment A - Audit Wrap Up Communication Page 9 of 15
9
AUDIT WRAP-UP – DECEMBER 31, 2017
GASB Standards Effective in 2017
GASB STATEMENT NO. 74, ACCOUNTING AND FINANCIAL REPORTING FOR
POSTEMPLOYMENT BENEFIT PLANS (OPEB) OTHER THAN PENSION PLANS
Provides reporting requirements for OPEB plans and applies to both defined benefit and defined
contribution plans administered through trusts that meet certain criteria:
1. Contributions are irrevocable,
2. Plan assets are dedicated to providing benefits according to the plan terms,
3. Plan assets are legally protected from creditors.
Guidance is also provided for plans not held in trust.
The requirements follow GASB 67, requiring the statement of net positon and statement of changes
in fiduciary net positon as well as the same RSI schedules.
The pronouncement will be effective starting with years ending June 30, 2017.
GASB STATEMENT NO. 80, BLENDING REQUIREMENTS FOR CERTAIN COMPONENT UNITS,
AN AMENDMENT OF GASB 14
Specifies that a component unit incorporated as a nonprofit when the primary government is the
sole member would be reported by the primary government as a blended component unit.
The pronouncement will be effective starting with years ending June 30, 2017.
GASB STATEMENT NO. 82, PENSION ISSUES
Addresses three issues that arose during implementation of GASB 67 and 68.
1. The first relates to the definition of covered payroll included in Required Supplementary
Information. Covered payroll is compensation paid to employees on which contributions are
based.
2. The pronouncement also clarifies that a deviation from actuarial standards is not considered
to be in conformity with the requirements of GASB 67 or 68 for selection of assumptions in
determining the total pension liability.
3. The last issue relates to employer-paid member contributions, commonly referred to as
employer “pick-up”. When an employer pays contributions on behalf of members they should
be classified as member contributions for GASB 67 plan statements and as employee
contributions for GASB 68 reporting and included in salary expense.
The pronouncement will be effective starting with years ending June 30, 2017.
GASB STATEMENT NO. 81, IRREVOCABLE SPLIT-INTEREST AGREEMENTS
Will require governments to recognize assets, liabilities and deferred inflows at fair value when the
government is a beneficiary of an irrevocable split-interest agreement.
Examples include charitable lead trusts, charitable remainder trusts and life-interest in real estate.
The pronouncement will be effective starting with years ending December 31, 2017.
Attachment A - Audit Wrap Up Communication Page 10 of 15
10
AUDIT WRAP-UP – DECEMBER 31, 2017
GASB Standards Effective in 2018 -2020
GASB STATEMENT NO. 75, ACCOUNTING AND FINANCIAL REPORTING FOR
POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS
Establishes measurement criteria for the Other Postemployment Benefits (OPEB) liability of state
and local governments and mirrors the requirements of GASB 68.
For plans administered through trust governments must recognize the net OPEB liability.
For plans not administered through trust the government must recognize the total OPEB liability.
The pronouncement will be effective starting with years ending June 30, 2018.
GASB STATEMENT NO. 83, CERTAIN ASSET RETIREMENT OBLIGATIONS
Establishes measurement criteria for recording a liability for the retirement or removal of certain
assets such as:
Nuclear power plants
Sewage treatment facilities
Coal-fired power plant
Wind turbines
X-ray machines
Governments with legal obligations to perform future asset retirement activities related to its
tangible capital assets would be required to recognize a liability.
A liability and corresponding deferred outflow is recorded when the liability is both incurred and
reasonable estimable.
The liability is based on best estimate of current value of outlays expected to be incurred.
Must be both an external obligating event, such as a court judgment or federal, state or local law;
and an internal obligating event, such as contamination or retirement.
The pronouncement will be effective starting with years ending June 30, 2019.
GASB STATEMENT NO. 84, FIDUCIARY ACTIVITIES
Establishes criteria for reporting fiduciary activities that focuses on whether the government
controls the assets and the fiduciary relationship with the beneficiaries.
The statement describes four fiduciary funds:
1. Pension and OPEB funds
2. Investment trust funds
3. Private-purpose trust funds
4. Custodial funds
Custodial funds replace agency funds for activities that are not held in trust.
For activities for which a trust agreement exists, an investment trust fund or private purpose trust
fund will be used.
Pension funds not held in trust would be classified as custodial funds.
The pronouncement will be effective starting with years ending December 31, 2019.
Attachment A - Audit Wrap Up Communication Page 11 of 15
11
AUDIT WRAP-UP – DECEMBER 31, 2017
GASB Standards Effective in 2018 -2020
GASB STATEMENT NO. 85, OMNIBUS 2017
Addresses several practice issues that have been identified during implementation of certain GASB
Statements:
1. Blending a component unit when the primary government is a business-type activity that reports
in a single column.
2. Reporting amounts previously reported as goodwill and negative goodwill.
3. Classifying real estate held by insurance entities.
4. Measuring certain money market instruments at amortized cost.
5. Timing of the measurement of pension or OPEB liabilities and expenditures in governmental fund
financial statements.
6. Recognizing on-behalf payments for pensions or OPEB in employer financial statements.
7. Presenting payroll-related measures in RSI for OPEB plans and employers that provide OPEB.
8. Classifying employer-paid member contributions for OPEB.
9. Simplifying certain aspects of the alternative measurement method for OPEB.
10. Accounting and reporting for OPEB provided through certain multiple-employer defined benefit
OPEB plans.
The pronouncement will be effective starting with years ending June 30, 2018.
GASB STATEMENT NO. 86, CERTAIN DEBT EXTINGUISHMENT ISSUES
Resolves issue of how to record in-substance defeasance of debt when solely existing resources are
used.
Current standards only address reporting requirements when debt is extinguished using bond
proceeds.
When cash or other existing resources are placed in an irrevocable trust to extinguish debt it is
considered to be in-substance defeasance, assuming all criteria are met.
The difference between the reacquisition price and the net carrying amount of the debt will be
recognized as a separately identified gain or loss in the period of defeasance. This differs from
current practice when debt is extinguished using bond proceeds, whereby the difference is deferred.
Payments to the escrow agent from existing resources should be reported as debt service
expenditures in governmental fund types.
The pronouncement will be effective starting with years ending June 30, 2018.
Attachment A - Audit Wrap Up Communication Page 12 of 15
12
AUDIT WRAP-UP – DECEMBER 31, 2017
GASB Standards Effective in 2018 -2020
GASB STATEMENT NO. 87, LEASES
This standard will require recognition of certain lease assets and liabilities for leases that are
currently classified as operating leases.
Eliminates the distinction between operating and capital leases - all leases will be recorded on the
statement of net position/balance sheet.
• New definition of a lease - a contract that conveys the right to use another entity’s nonfinancial
asset for a period of time in an exchange or exchange-like transaction.
Excludes leases that transfer ownership under a bargain purchase option or service concession
arrangements that are covered by GASB Statement No. 60.
Lessees would recognize a lease liability and an intangible right-to-use lease asset which would be
amortized in a systematic and reasonable manner over the shorter of the lease term or the useful
life of the underlying asset. Short-term leases are excluded.
Lessor would recognize lease receivable and deferred inflow of resources which would be recognized
as revenue in a systematic and rational manner over the term of the lease.
The pronouncement will be effective starting with years ending December 31, 2020.
Attachment A - Audit Wrap Up Communication Page 13 of 15
Estes AJE
Year End: December 31, 2017 Started by Prepared by Detail Review
Adjusting Journal Entries KRS 7/26/2018 TLL 7/30/2018
Date: 1/1/2017 To 12/31/2017 General Review Partner FC Review
Account No: AJE-01 To AJE-99 TLL 7/30/2018
Number Date Name Account No Reference Annotation Debit Credit Recurrence Misstatement
AJE-01 12/31/2017 CURRENT ASSETS / POOLED CASH 502-0000-101.00-00 502 A.02 724,945.00
AJE-01 12/31/2017 UTILITY EXPENDITURES / PURCHASED POW 502-6100-520.28-08 502 A.02 707,337.00
AJE-01 12/31/2017 UTILITY EXPENDITURES / WIND POWER 502-6100-520.28-18 502 A.02 17,608.00
AJE-01 12/31/2017 CURRENT ASSETS / INTERNAL CLEARING AC999-0000-100.00-00 999 A.02 724,945.00
AJE-01 12/31/2017 CHECKING ACCOUNT / BANK OF COLORADO 999-0000-101.10-05 999 A.02 724,945.00
To reclass January energy payment
booked in December.
AJE-02 12/31/2017 OTHER ASSETS / DO-CONTR AFTER MEASU 503-0000-170.00-00 503 3,379.00
AJE-02 12/31/2017 DEFERRED OUTFLOW / PERA CONT SUBS M 503-0000-190.00-00 503 41,542.00
AJE-02 12/31/2017 DEFERRED OUTFLOW / PERA CHG PROPOR 503-0000-191.00-00 503 104,632.00
AJE-02 12/31/2017 DEFERRED OUTFLOW / PERA CHG IN EXPER503-0000-192.00-00 503 31,609.00
AJE-02 12/31/2017 DEFERRED OUTFLOW / CHANGE IN ASSUMP 503-0000-193.00-00 503 180,270.00
AJE-02 12/31/2017 DEFERRED POSTEMPLOY BENEF / NET PEN 503-0000-238.10-00 503 726,422.00
AJE-02 12/31/2017 DEFERRED POSTEMPLOY BENEF / DEF INFL 503-0000-238.20-00 503 60.00
AJE-02 12/31/2017 DEFERRED POSTEMPLOY BENEF / DEF INFL 503-0000-238.30-00 503 2,856.00
AJE-02 12/31/2017 DEFERRED POSTEMPLOY BENEF / PERA CH 503-0000-238.40-00 503 25,895.00
AJE-02 12/31/2017 EMPLOYER BENEFITS / PENSION BENEFIT E 503-6200-530.14-90 503 99,566.00
AJE-02 12/31/2017 EMPLOYER BENEFITS / PENSION BENEFIT E 503-6300-540.14-90 503 243,380.00
AJE-02 12/31/2017 EMPLOYER BENEFITS / PENSION BENEFIT E 503-6400-550.14-90 503 30,203.00
AJE-02 12/31/2017 EMPLOYER BENEFITS / PENSION BENEFIT E 503-6500-560.14-90 503 52,872.00
To record the activitiy for GASB
68 in the Water Fund.
AJE-03 12/31/2017 OTHER ASSETS / DO-CONTR AFTER MEASU 502-0000-170.00-00 502 38,438.00
AJE-03 12/31/2017 DEFERRED OUTFLOW / PERA CONT SUBS M 502-0000-190.00-00 502 95,023.00
AJE-03 12/31/2017 DEFERRED OUTFLOW / PERA CHG PROPOR 502-0000-191.00-00 502 3,799.00
AJE-03 12/31/2017 DEFERRED OUTFLOW / PERA CHG IN EXPER502-0000-192.00-00 502 51,131.00
AJE-03 12/31/2017 DEFERRED OUTFLOW/CHANGE IN ASSUMPT 502-0000-193.00-00 502 298,795.00
AJE-03 12/31/2017 DEFERRED POSTEMPLOY BENEF / NET PEN 502-0000-238.10-00 502 1,036,112.00
AJE-03 12/31/2017 DEFERRED POSTEMPLOY BENEF / DEF INFL 502-0000-238.20-00 502 99.00
AJE-03 12/31/2017 DEFERRED POSTEMPLOY BENEF / DEF INFL 502-0000-238.30-00 502 10,538.00
AJE-03 12/31/2017 DEFERRED POSTEMPLOY BENEF / PERA CH 502-0000-238.40-00 502 45,997.00
AJE-03 12/31/2017 EMPLOYER BENEFITS / PENSION BENEFIT E 502-6301-540.14-90 502 472,019.00
AJE-03 12/31/2017 EMPLOYER BENEFITS / PENSION BENEFIT E 502-6401-550.14-90 502 61,936.00
AJE-03 12/31/2017 EMPLOYER BENEFITS / PENSION BENEFIT E 502-6501-560.14-90 502 148,383.00
To report the GASB 68 activity for
the Light and Power Fund.
3,352,368.00 3,352,368.00
Net Income (Loss) (3,517,546.00)
7/30/2018
10:19 AM Page 1
Attachment A - Audit Wrap Up Communication Page 14 of 15
Estes PAJE
Year End: December 31, 2017 Started by Prepared by Detail Review
Passed Adjusting Journal Entries KRS 7/26/2018 TLL 7/30/2018
Date: 1/1/2017 To 12/31/2017 General Review Partner FC Review
TLL 7/30/2018
Number Date Name Account No Reference Annotation Debit Credit Recurrence Misstatement
PAJE-01 12/31/2017 FUND BALANCE / UNRESERVED FUND BALA 220-0000-253.00-00 220 10.05 40,046.00
PAJE-01 12/31/2017 COUNTY SHARED REVENUES / OPEN SPACE220-0000-338.20-00 220 10.05 40,046.00
To adjust 2017 revenue for amounts
received in February 2017 related to 2016 rvenue.
40,046.00 40,046.00
Net Income (Loss) (3,557,592.00)
7/30/2018
10:19 AM Page 1
Attachment A - Audit Wrap Up Communication Page 15 of 15
“Beyond the Numbers”
A Closer Look into the Financial and Non-
financial Data for the Town of Estes Park,
Colorado
Prepared by: Anton Collins Mitchell LLP
Date: August 23, 2018
This presentation was prepared as part
of our audit, has consequential
limitations, is restricted to those
charged with governance and, if
appropriate, management and should
not be used by anyone other than those
specified parties
Attachment B - Beyond the Numbers Report Page 1 of 27
August 23, 2018
Mr. Duane Hudson
Finance Director
Town of Estes Park, Colorado
170 MacGregor Avenue
Estes Park, Colorado 80517
Dear Mr. Hudson, Honorable Mayor and Members of Town Board of Trustees:
Every year we come before you to present your financial statements, along with our audit wrap up
document. During this presentation, we attempt to convey in concise terms what these financial
statements and footnotes mean; what story they tell. However, the information is very detailed, and
organized in a way that makes it difficult to extract meaning without further review and analysis.
In the pages that follow this cover letter, we have summarized information extracted from the Town of
Estes Park, Colorado’s (the “Town”) annual report, in a manner that will present how the Town’s
financial ratios and statistics have changed over the past three years, and also how these same ratios
and statistics compare to other municipal organizations similar to yours.
We have compiled data from three (3) municipal organizations in the State of Colorado, primarily from
the ski towns and other mountain communities, with populations between approximately 2,500 and
12,700, with an average of approximately 8,400. These 3 municipal organizations are the City of
Steamboat Springs, City of Glenwood Springs, and Town of Telluride.
We have also included in this presentation, discussion that should help you understand what these ratios
mean, and interpret the trends observed, as well as the Town’s information in relation to comparative
market data.
If at any point, you’d desire to discuss this information further, we are always available.
Sincerely,
Randy L. Watkins
Partner – Governmental and Nonprofit Practice
Attachment B - Beyond the Numbers Report Page 2 of 27
Contents
Organization ............................................................................................................. 4
Profile .................................................................................................................. 4
Government-Wide Information ........................................................................................ 5
Change in Net Position as a Percentage of Net Position ....................................................... 5
Revenue Coverage Ratio ............................................................................................ 6
Unrestricted Net Position as a Percentage of Current Year Revenues ....................................... 7
Accumulated Depreciation as a Percent of Depreciable Capital Assets ..................................... 8
Liquidity Ratio ........................................................................................................ 9
Debt to Assets Leverage Ratio ..................................................................................... 10
Total Debt Per Capita ............................................................................................... 11
Tax Revenue Per Capita ............................................................................................ 12
Total Grants, Contributions and Other Intergovernmental Revenue as a Percent of Total Revenues . 13
Total Expense Per Capita .......................................................................................... 14
Total General Government (Administration) Expense Per Capita ........................................... 15
Total Public Safety Expense Per Capita .......................................................................... 16
Total Interest Expense Per Capita ................................................................................ 17
Governmental Fund Information ..................................................................................... 18
Total Debt Service Expenditures as a Percent of Total Revenue ............................................ 18
Capital Outlay Expenditures as a Percent of Total Expenditures ............................................ 19
General Fund Information ............................................................................................ 20
Unassigned Fund Balance as a Percent of Total Revenues .................................................... 20
Intergovernmental Revenue as a Percent of Total Revenue .................................................. 21
Transfers In as a Percent of Total Revenues and Transfers In ............................................... 22
Capital Asset Analysis ................................................................................................. 23
Governmental Activities ............................................................................................ 23
Business-type Activities ............................................................................................ 24
Debt Service Analysis .................................................................................................. 25
Debt Profile .......................................................................................................... 25
Future Maturities .................................................................................................... 26
Attachment B - Beyond the Numbers Report Page 3 of 27
4 Organization The ratios, percentages, and per capita data presented herein are organized into three different sections, starting at the most macro level; the government-wide statements, drilling down next to the governmental funds financial statement level, followed by a more micro level, the General fund financial statements. There is a fourth section which presents future debt service obligations for the business-type and governmental activities, and analyzes the current aging of capital assets for the business-type and governmental activities. The formula used to calculate the ratio, percentage or per capita data is first described, then the data is presented, and finally additional interpretation is discussed. The interpretation of the data is largely derived from our understanding of the organization, heavily supplemented by discussions with senior-level management with the Town of Estes Park, Colorado (the “Town”). Profile 1 The 2017 census data was extracted from the Town’s Comprehensive Annual Financial Report (“CAFR”). Municipality: Town of Estes Park, Colorado Population: 6,3391 Peer Group Size: 2,500 – 12,700 # of Municipalities included in peer group: Three Average Population of Peer Group: 8,386 Largest Population in Peer Group: 12,698 Smallest Population in Peer Group: 2,552 Attachment B - Beyond the Numbers Report Page 4 of 27
5 Government-Wide Information Change in Net Position as a Percentage of Net Position Current Year Change in Net Position --------------------------------------------------- Net Position at the Beginning of the year The change in net position as a percentage of beginning net position provides an indication of whether the financial condition of the municipal organization is improving or deteriorating. This analysis focuses on the change in net position for the governmental activities of the Town. During 2017, the Town’s change in net position was more than the peer group. Attachment B - Beyond the Numbers Report Page 5 of 27
6 Revenue Coverage Ratio Governmental Activities Current Year Revenue ----------------------------------------------------------------- Governmental Activities Current Year Expenses This ratio indicates whether the Town’s current revenues are sufficient to provide for annual expenditures. When the ratio exceeds 1.00 : 1, revenues generated from citizens are sufficient to provide for the costs of services received. When the ratio falls below 1.00 : 1, the Town is using net position to fund operations. In 2015 and 2017, the Town’s revenue coverage was greater than the peer group and in 2016 it was less than the peer group. However, the ratio has exceeded 1.00 :1, which indicates that revenues have been sufficient to cover costs. Attachment B - Beyond the Numbers Report Page 6 of 27
7 Unrestricted Net Position as a Percentage of Current Year Revenues Governmental Activities Unrestricted Net Position -------------------------------------------------------------- Governmental Activities Current Year Revenues This measures the municipal organization’s ability to sustain an interruption in revenues. For example, a percentage of 25% would indicate that the municipal organization would be able to continue to function at full capacity for a period of approximately three months. During 2015 and 2016, the Town had at least two months in unrestricted net position over the last three years. The Town was dramatically affected by costs resulting from the 2013 Flood. The governmental activities have used a significant amount of its net position to pay for Fish Creek Road flood damage repair costs which were eventually reimbursed by a FHWA grant later in 2018. The average for the peer group was almost 7.5 months 2017. The GFOA recommends at least two months in unrestricted net position, which the Town exceeded in the last three years. Attachment B - Beyond the Numbers Report Page 7 of 27
8 Accumulated Depreciation as a Percent of Depreciable Capital Assets Governmental Activities Accumulated Depreciation --------------------------------------------------------------- Governmental Activities Depreciable Capital Assets This measures the approximate age of depreciable capital assets. A lower percentage indicates a longer remaining average life of capital assets, and presumably a reduced level of repairs and maintenance. A higher percentage indicates that capital asset replacements or repairs are more likely in the near term. The Town of Estes Park has a relatively higher percentage than the peer group indicating that capital assets are aging at a faster rate than replacement is occurring. The capital assets have less than half of the original estimated useful life remaining. Attachment B - Beyond the Numbers Report Page 8 of 27
9 Liquidity Ratio Governmental Activities Liquid Assets ------------------------------------------------------ Governmental Activities Current Liabilities This ratio measures your ability to meet the demands of current obligations from existing cash and liquid investments. A higher ratio indicates that the municipal organization is better positioned to meet current obligations, and anything above 1.00 : 1 is considered acceptable, as it means the Town is not illiquid. Maintaining a 1.00 : 1 position should be considered a baseline threshold in cash management considerations. Attachment B - Beyond the Numbers Report Page 9 of 27
10 Debt to Assets Leverage Ratio Governmental Activities Total Debt ----------------------------------------------- Governmental Activities Total Assets This ratio measures how much of your assets have been financed using debt versus accumulated earnings (Net Position). It is generally considered favorable to have a lower ratio, and anything less than 0.25 : 1 would be considered acceptable. This ratio was considerably less than the peer group in 2015 and 2016. In 2017, the Town entered into a Lease Purchase Agreement to finance the Estes Park Visitor Center Parking Garage. Capital asset balances comprise the majority of the balance in total assets, which are reduced by depreciation expense. Major capital improvements commonly require debt financing, so monitoring the remaining useful lives and the relative age of infrastructure and major capital assets serves to predict future borrowing requirements. See additional discussions above under “Accumulated Depreciation as a Percentage of Depreciable Capital Assets,” and in later sections of this report. Attachment B - Beyond the Numbers Report Page 10 of 27
11 Total Debt Per Capita Governmental Activities Total Debt --------------------------------------------- Population This measures the level of debt burden for which your citizens are responsible. A lower amount improves your ability to borrow future funds at a lower overall cost. The Town of Estes Park debt burden increased in 2017 with the additional of the Lease Purchase Agreement, but is remains lower than the peer group. See additional discussion above under, “Debt to Assets Leverage Ratio.” Attachment B - Beyond the Numbers Report Page 11 of 27
12 Tax Revenue Per Capita Governmental Activities Tax Revenue ----------------------------------------------- Population This measures how much tax each of your citizens is responsible for paying annually. A lower rate is considered favorable, as it indicates that the municipality is better positioned to raise taxes to meet future financial needs. The Town of Estes Park has seen increased taxes paid from 2015 to 2017 Tax revenue also includes franchise fees collected by the Town. Both sales tax and franchise fees disproportionally benefit the citizens of the Town, as they can be significantly sourced from outside of the Town’s boundaries (i.e. citizens of other communities’ spending money within the Town of Estes Park). Compared to the Town’s peer group, taxes per citizen are lower by 18.0%. Attachment B - Beyond the Numbers Report Page 12 of 27
13 Total Grants, Contributions and Other Intergovernmental Revenue as a Percent of Total Revenues Governmental Activities Operating and Capital Grants/Contributions + Other Intergovernmental Revenue -------------------------------------------------------------------- Governmental Activities Current Year Revenues This measures your reliance on grants, contributions and other outside sources of financing. Generally, a lower ratio is considered encouraging, as it indicates that the municipality is less dependent on sources that are considered unreliable and unpredictable. This ratio can vary depending on the availability of grants and contributions and the Town’s needs. Over the past three years, the Town of Estes Park has received significantly more of these sources of revenues than the peer group. Attachment B - Beyond the Numbers Report Page 13 of 27
14 Total Expense Per Capita Governmental Activities Total Expense ------------------------------------------------ Population This measures the average level of cost necessary to provide services to each citizen. Generally, a lower cost per citizen is considered favorable. However, great care should be taken when considering this measure compared to other municipalities or even on a year over year basis. Major factors contributing to this amount include the quality of services provided, and the types of services available to the municipalities’ citizens (i.e. fire protection, parks and recreation, and other services). The Town of Estes Park has increased the level of costs per citizen over the last three years. The Town of Estes Park is a full service government that provides police, public works, culture and recreation to its citizens. The costs are approximately 6 percent greater than the peer group, but not all municipalities in this peer group provide the same level of services. Attachment B - Beyond the Numbers Report Page 14 of 27
15 Total General Government (Administration) Expense Per Capita Governmental Activities Total General Government (Administration) Expense -------------------------------------------------------------- Population This measures the average cost per citizen for the delivery of general administrative services. As noted above, a lower amount is generally considered positive; however, the level and quality of services provided significantly affects this number. The trend for these costs is similar to total expenses. General administrative services for the Town include legislative, judicial, executive, administrative, financial administration, community development, buildings, community services and other. Compared to the peer group, the Town of Estes Park’s costs are higher; however, not all municipalities in this peer group provide the same level of services. Attachment B - Beyond the Numbers Report Page 15 of 27
16 Total Public Safety Expense Per Capita Governmental Activities Total Public Safety Expense ------------------------------------------------------------- Population This measures the average cost per citizen for the delivery of public safety services. As noted above, a lower amount is generally considered positive; however, the level and quality of services provided significantly affects this number. These costs have increased from 2015 to 2017. Compared to the peer group, the Town of Estes Park’s costs are higher in 2016 and 2017 higher (approximately 12%). Attachment B - Beyond the Numbers Report Page 16 of 27
17 Total Interest Expense Per Capita Governmental Activities Total Interest Expense ------------------------------------------------------------ Population Like the debt ratio, this measures the debt service burden on average per citizen. A lower amount is considered favorable and generally indicates lower debt service costs (i.e. lower effective interest rate, or less debt). The Town’s interest cost per citizen is considerably lower than the peer group, primarily due to the significantly higher debt load per citizen in the peer group (see analysis on pg. 11). Attachment B - Beyond the Numbers Report Page 17 of 27
18 Governmental Fund Information Total Debt Service Expenditures as a Percent of Total Revenue Governmental Funds Total Debt Service Expenditures --------------------------------------------------------------- Governmental Funds Total Revenue This measures the level of current year revenues that are dedicated to meeting the debt service requirements, thereby reducing the amount of revenues available for other services/needs. The Town of Estes Park’s debt service is lower than the peer group. Attachment B - Beyond the Numbers Report Page 18 of 27
19 Capital Outlay Expenditures as a Percent of Total Expenditures Governmental Funds Total Capital Outlay Expenditures --------------------------------------------------------------- Governmental Funds Total Expenditures This measures the amount of capital asset expenditures, relative to overall expenditures. Generally, this number fluctuates based on the capital improvement needs of the municipality. The relative age of capital assets may serve as a leading indicator for predicting fluctuations in this number. The Town of Estes Park has seen fluctuations over the past three years, and has remained above the average of the peer group in 2016 and 2017. The Town has incurred significant capital acquisitions relating to the Fish Creek Road flood repairs and the Parking garage design and construction. Attachment B - Beyond the Numbers Report Page 19 of 27
20 General Fund Information Unassigned Fund Balance as a Percent of Total Revenues General Fund Unassigned Fund Balance ------------------------------------------------- General Fund Total Revenues This serves as an indicator of the how much of the annual expenditures of the municipality would be covered if the collection of revenues ceased for an indeterminable period of time. Higher percentages are generally viewed positively. However, excessive fund balances may be viewed by citizens as an unnecessary accumulation of resources, barring any planned major improvements. In 2015 and 2016, the Town of Estes Park has maintained a consistent percentage of unassigned fund balance. This decreased in 2017 due to the expenditures incurred for the Fish Creek Road flood repairs where expenditures were incurred in 2017 that were reimbursed in 2018. Expressed in terms of days, the Town had approximately 74 days, 98 days, and 11 days of annual expenditures in unassigned fund balance as of December 31, 2014, 2015, and 2016, respectively. This is compared to 148 days for the Peer Group Average as of December 31, 2017. The GFOA generally recommends an unassigned fund balance of two months. Attachment B - Beyond the Numbers Report Page 20 of 27
21 Intergovernmental Revenue as a Percent of Total Revenue General Fund Intergovernmental Revenue -------------------------------------------------- General Fund Total Revenue This ratio reveals the portion of the general funds finances that are covered by external sources. A lower percentage is considered favorable as it indicates a reduced reliance on external sources. Over the three year period ending December 31, 2017, the Town of Estes Park’s dependence on intergovernmental revenues has been consistent ranging from 10 percent to a little over 15 percent. The Town has continually been higher than the average of the peer group due to grant related revenues for flood projects and the construction of the parking garage. Attachment B - Beyond the Numbers Report Page 21 of 27
22 Transfers In as a Percent of Total Revenues and Transfers In General Fund Transfers In ------------------------------------------------------- General Fund Total Revenues and Transfers In This ratio measures the General Funds reliance on other funds to finance current operations. Higher numbers generally indicate an unfavorable reliance on funding from other funds. The Town of Estes Park has maintained a relatively consistent level of General Fund finances coming from other funds. The Town’s percentage is higher than the peer group, as the Light and Power and Water Funds have subsidized the General Fund out of surplus revenues. Attachment B - Beyond the Numbers Report Page 22 of 27
23 Capital Asset Analysis The following analysis presents capital asset balances; cost and accumulated depreciation, and estimates the remaining useful lives by dividing depreciation expense into total net book value by category. This information can be compared to the range of estimated useful lives by category to get a general perspective for how soon assets may require replacement. This is a leading indicator of imminent major capital expenditures. Governmental Activities Depreciable LivesCostAccumulated Depreciation Net Book Value2017 Depreciation ExpenseAverage Remaining LifeGovernmental ActivitiesCapital Assets Being DepreciatedBuildings30 - 40 years 23,525,777$ (10,143,336)$ 13,382,441$ 655,628$ 20.41 YearsInfrastructure25 - 50 years 121,983,862 (86,396,448) 35,587,414 1,721,104 20.68 YearsMachinery and equipment20 - 25 years 8,660,096 (5,130,333) 3,529,763 686,911 5.14 YearsTotals154,169,735$ (101,670,117)$ 52,499,618$ 3,063,643$ Attachment B - Beyond the Numbers Report Page 23 of 27
24 Business-type Activities Depreciable LivesCostAccumulated Depreciation Net Book Value2017 Depreciation ExpenseAverage Remaining LifeBusiness-type ActivitiesCapital Assets Being DepreciatedBuildings30 - 40 years 10,266,186$ (3,685,925)$ 6,580,261$ 284,844$ 23.1 YearsInfrastructure25 - 50 years 34,938,064 (14,575,326) 20,362,738 762,312 26.71 YearsMachinery and equipment20 - 25 years 15,155,586 (8,577,506) 6,578,080 406,789 16.17 YearsTotals60,359,836$ (26,838,757)$ 33,521,079$ 1,453,945$ Attachment B - Beyond the Numbers Report Page 24 of 27
25 Debt Service Analysis Debt Profile Description Balance Interest Rate Maturity S&P Credit Rating2 Governmental Activities: Certificates of Participation $ 4,540,000 2.430% 2028 Unrated Capital Lease 121,149 3.240% 2019 Unrated Lease Purchase Agreement (including premium) 4,457,381 4.500% 2032 Unrated Business-type Activities: 2007 Light and Power Bonds 3,655,000 3.875% 2027 AA- 2008A Water Loan 3,502,117 3.260% 2028 Unrated $ 36,049,138 2 Based on a rating per the Standard & Poor’s rating website www.standardandpoors.com. The definition for “AA” is, “Very strong capacity to meet financial commitments.” The Definition for “Stable” is, “rating is not likely to change." Attachment B - Beyond the Numbers Report Page 25 of 27
26 Future Maturities The following charts are a graphical depiction of future debt maturities, principal and interest, and serve to demonstrate the future funding requirements resulting from debt obligations. Governmental Activities Attachment B - Beyond the Numbers Report Page 26 of 27
27 Business-type Activities Attachment B - Beyond the Numbers Report Page 27 of 27
August 23, 2018
Finance Department of the
Town of Estes Park, Colorado
170 MacGregor Avenue
Estes Park, Colorado 80517
During the course of our audit of the financial statements of the Town of Estes Park, Colorado
(the “Town”) for the year ended December 31, 2017, we observed the Town’s significant
accounting policies and procedures and certain business, financial, and administrative practices.
In planning and performing our audit of the financial statements of the Town as of and for the
year ended December 31, 2017, in accordance with auditing standards generally accepted in the
United States of America and Government Auditing Standards, we considered the Town’s internal
control over financial reporting (internal control) as a basis for designing our auditing procedures
for the purpose of expressing our opinion on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, we do
not express an opinion on the effectiveness of the Town’s internal control.
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 significant deficiency 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. 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 Town’s financial statements will not
be prevented, or detected and corrected on a timely basis.
Our consideration of internal control was for the limited purpose described in the second
paragraph of this letter and would not necessarily identify all deficiencies in internal control that
might be significant deficiencies or material weaknesses.
As a result of our observations, we have the following suggestions for improving the existing
internal control. These matters did not affect the fair presentation of the financial statements.
Davis Bacon Grant Requirements
For certain construction projects that are reimbursed by federal funding, the Town is required
to obtain certified payrolls from the contractors and subcontractors that perform construction
work for the project. During our Single Audit procedures, we found that the Town had not
received all of the certified payrolls from the contractor and subcontractors for the Estes Park
Transit Facility Parking Structure. The Town did confirm with the contractor that during the
periods not received, no work was conducted for the project. However, the contractor and
subcontractors should provide a certified payroll in these instances that states that no work was
performed. In addition, we noted that the Town completed its review of the submitted certified
payrolls in September and October 2017. We recommend that the Town ensure that it receives
certified payrolls for all weeks under the project, even when there is no work performed. IN
addition, we recommend that the Town review certified payrolls when submitted to allow the
Town to resolve identified issues in a timely manner.
Attachment C - Mangement Letter Page 1 of 2
Open Space Tax Revenue
During our testing of open space revenue, we noted that the Town had not accrued revenues
received in February 2017 relating to 2016 as accounts receivable in 2016 totaling approximately
$40,000. As a result, the Town had thirteen months of revenue recorded for open space tax
revenue received from Larimer County in 2017. We recommend that the Town implement a
review of revenue recorded to ensure that revenues that are received monthly are recorded in
the proper fiscal year.
* * * * *
We will be happy discuss with you the above recommendations and their implementation at your
convenience.
This communication is intended solely for the information and use of management and others
within the organization and is not intended to be and should not be used by anyone other than
these specified parties.
We appreciate the outstanding cooperation from your staff that our personnel received during
the audit of the Town’s financial statements.
Very truly yours,
Anton Collins Mitchell LLP
Attachment C - Mangement Letter Page 2 of 2