CITY OF FORTUNA
CITY COUNCIL
&
MANAGEMENT REPORT
For the Year Ended
JUNE 30, 2021
TABLE OF CONTENTS •
PAGE
Report on Internal Controls 1
Required Communications 2-3
Management Observations 4
R. J. RICCIARDI, INC.
CERTIFIED PUBLIC ACCOUNTANTS
To the Honorable Members
of the City Council
City of Fortuna
Fortuna, California
In planning and performing our audit of the basic financial statements of City of Fortuna for the fiscal year ended June 30, 2021, in accordance with auditing standards generally accepted in the United States of America, we considered its internal control over financial reporting as a basis for designing our auditing procedures for the purpos of expressing our opinion on the basic financial statements, but not for the purpose of expressing an opinion on th effectiveness of its internal control. Accordingly, we do not express an opinion on the effectiveness of City of Fortuna's internal control.
A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or a combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or a combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity's internal control.
Our consideration of the internal control was for the limited purpose described in the first paragraph and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses, as defined above. We did not identify any deficiencies in internal control that we consider material weaknesses, as defined above.
During our audit, we noted certain matters involving internal controls and other operational matters that are presented for your consideration in this report. We will review the status of these comments during our next audit engagement. Our comments and recommendations, all of which have been discussed with appropriate members of management, are not intended to be all-inclusive, but rather represent those matters that we considered worthy of your consideration. Our comments and recommendations are submitted as constructive suggestions to assist you in rengthe pecontrol end procedures hey in noticede to refect on the cats orm any of anal splaye ese matters, or to assist City of Fortuna in implementing the recommendatior The pot is intended alton, ate i nor tended use of and home nan be use by i of city he lan than We thank City of Fortuna's staff for its cooperation during our audit.
R.D. Ricciardi, Inc.
R.J. Ricciardi, Inc.
Certified Public Accountants
San Rafael, California
April 16, 2022
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1101 FIFTH AVENUE, SUITE 360 SAN RAFAEL, CA 94901 TEL (415) 457-1215 FAX (415) 457-6735 www.rjrcpa.com R. J. RICCIARDI, INC.
CERTIFIED PUBLIC ACCOUNTANTS
To the Honorable Members
of the City Council
City of Fortuna
Fortuna, California
We have audited the basic financial statements of City of Fortuna for the year ended June 30, 2021. Professional standards require that we provide you with the following information related to our audit.
Our Responsibility under U.S. Generally Accepted Auditing Standards As stated in our engagement letter dated August 30, 2021, our responsibility, as described by professional standards, is to plan and perform our audit to obtain reasonable, but not absolute, assurance that the financial statements are free of material misstatement and are fairly presented in accordance with U.S. generally accepted accounting principles.
Because an audit is designed to provide reasonable, but not absolute assurance and because we did not perform a detailed examination of all transactions, there is a risk that material misstatements may exist and not be detected by us.
As part of our audit, we considered the internal control of City of Fortuna. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by City of Fortuna are described in Note 1 to the basic financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year. We noted no transactions entered into by City of Fortuna during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred.
Accounting estimates are an integral part of the basic 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 basic financial statements and because of the possibility that future events affecting them may differ significantly from those expected. We evaluated the key factors and assumptions used to develop the accounting estimates in determining that they are reasonable in relation to the basic financial statements taken as a whole. The most sensitive estimate(s) affecting the basic financial statements were:
Accrual and disclosure of compensated absences.
Capital asset lives and depreciation expense.
Actuarial assumptions for pension plan disclosure.
• Accrual and disclosure of leases.
Fair value of investments and financial instruments.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Audit Adjustments
Professional standards require us to accumulate all known and likely adjustments identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such adjustments.
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1101 FIFTH AVENUE, SUITE 360 SAN RAFAEL, CA 94901 TEL (415) 457-1215 FAX (415) 457-6735 www.rjrcpa.com To the Honorable Members
of the City Council
City of Fortuna - Page 2
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a financial accounting reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financia statements or the auditors' report. We are pleased to report that no such disagreements arose during the course of our Management Representations
We have requested certain representations from management that are included in the management representation letter dated April 16, 2022.
Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similat to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to City of Fortuna's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, out 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.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as City of Fortuna's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.
Other Matters
We applied certain limited procedures to the Management's Discussion and Analysis and the Budgetary Comparison Schedule for the General Fund, and the other 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.
This report is intended solely for the information and use of management and City Council of City of Fortuna and others within the organization, and is not intended to be, and should not be, used by anyone other than these specified parties.
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City of Fortuna
CITY COUNCIL & MANAGEMENT REPORT
For the Year Ended June 30, 2021
Current Year Observations
There were no current year observations.
Prior Year Observations
1) Written Accounting, Administrative and Fraud Procedures Manual Observation:
During the course of out audit, we noted that City of Fortuna (the City) does not have a formal accounting.
Recommendation:
We recommended the City develop and maintain an up-to-date accounting, administrative and fraud procedures manual.
Status:
This recommendation has not been implemented.
2) Deposits and Cash Receipts
Observation:
During the course of out audit, we noted that cash receipt daily reports worksheets were not signed off by the employee that reconciled the drawer or their supervisor.
The City's cash receipt counters are not monitored by security cameras. Most of our audit clients have installed security cameras above their cash receipt counter areas as these units now appear to be more affordable.
Recommendation:
e recommended the City consider installing security cameras to monitor their cash receipt counters. We al commend cash receipts daily reports worksheets be signed off by the drawer operator and the employee wl reconciles the drawer or their supervisor.
Status:
This recommendation is in the process of being implemented - 4-