02 Staff Report - 2006/07 Comprehensive Annual Financial Reportpow N of MEETING DATE: 3/03/2008
\\IIU//. ITEM NO:
cos' caS~s COUNCIL/AGENCY AGENDA REPORT
DATE: MARCH 3, 2008
TO: MAYOR AND TOWN COUNCIL/
CHAIR AND MAMBERS OF THE REDEVELOPMENT AGENCY
.x a
FROM: GREG LARSON, TOWN MANAGER/EXECUTIVE DIRECTOR - ~SUBJECT: ACCEPT THE 2006/07 COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR)
AND MANAGEMENT LETTER
RECOMMENDATION:
Accept the 2006/07 Comprehensive Annual Financial Report (CAFR) and Management Letter.
BACKGROUND:
This CAFR presents the Town of Los Gatos and Town of Los Gatos Redevelopment Agency's financial
condition, results of operations and current economic condition, for the fiscal year ended June 30, 2007.
The 2007 CAFR received an unqualified opinion from C.G. Uhlenberg LLP, the Town's external
auditors. An unqualified opinion indicates the financial data of the Town is fairly presented according
to general accounting principles. Additionally, C.G. Uhlenberg LLP issued a Management Letter on
internal control structure to report on any material weaknesses in the Town's internal controls. A
material weakness is a significant deficiency which could lead to a material misstatement of the
financial statements. The auditor's report found the Town's internal control structure to have no
reportable material weaknesses.
DISCUSSION:
C.G. Uhlenberg LLP, the Town's auditors, conducted an audit in accordance with generally accepted
auditing standards and the standards for financial audits contained in the Government Audit Standards
(1994 Revision), issued by the Comptroller General of the United States. These standards require that
they plan and perform the audits to obtain reasonable assurance as to whether the financial statements
are free of material misstatement.
PREPARED BY: STEPHEN D.
Finance and Administrative ervices Director
SDC:pg
N:TINANCE\CAFR\FY2007-08\FY 2007-08\CAFR Agenda Report 2006-07.doe
Reviewed by: b w,1 Assistant Town Manager/Deputy Director _ --Town Attorney/General Counsel
Clerk Administrator/Secretaiy - Finance
Community Development
PAGE 2
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: ACCEPT THE 2006/07 COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR)
AND MANAGEMENT LETTER
MARCH 17, 2008
Staff and Town's auditors, C.G. Uhlenberg LLP, met with the Council Finance Committee on
Wednesday, February 20th, 2008 for an in-depth review of this year's reports to the Finance Committee.
The Committee was advised by staff that the audited statements for the year ended June 30, 2007
received an unqualified or "clean" opinion for the year, meaning the financial statements are fairly
presented and contain no material misstatements.
The Committee also confirmed with staff and the independent auditor that the $37.9 million of
Unrestricted Net Assets shown on page 12 of the CAFR is terminology mandated by the Governmental
Accounting Standard Board Statement #34. The amount presented as $37.9 million in unrestricted net
assets is accurate, but misleading. Although current accounting practices require the use of the term
"Unrestricted Net Assets," these funds are in fact designated for specific purposes. They are an overall
financial position indicator and not the amount of current resources available for budgetary purposes.
In addition, C.G. Uhlenberg LLP reviewed the Management Letter with Town staff and the Council
Finance Committee. One current year finding was reviewed with the Committee and staff explained its
response to the auditor's comments. The audit Management Letter and the Town's response are
included as Attachment 1 to this report. The internal control deficiencies were of a more routine
financial housekeeping nature. The Town's response to each finding describes how staff will address
each issue this fiscal year.
The Town has applied for and received the Government Finance Officers Association (GFOA),
Certificate of Achievement for Excellence in Financial Reporting, for the last twelve years. This report
is the Town's fifth CAFR prepared under the new reporting format required by the Governmental
Accounting Standards Board (GASB) Statement #34.
CONCLUSION:
As noted in the auditor's opinion, the CAFR fairly presents the fiscal year ending June 30, 2007
financial activity for the Town of Los Gatos and Redevelopment Agency. After reviewing the financial
documents with the Town's external auditors and Town staff, the Committee recommends that the
Council accept the CAFR and audit Management Letter for year ending June 30, 2007.
ENVIRONMENTAL ASSESSMENT:
Is not a project defined under CEQA, and no further action is required.
Attachments:
1. Audit Management Letter
2. CAFR
Distribution:
CAFR and audit Management Letter are available in the Clerk Department, and on file in the library.
Date: 3/03/08
2006/07 Comprehensive Annual Financial Report (CAFR) and Management
Letter
ATTACHEMENT I
Audit Management Letter
AND
ATTACHMENT 2
CAFR
ARE AVAILBLE FOR REVIEW IN THE
CLERK DEPARMENT