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INDEPENDE
NT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the City Council
City of Pasadena, California
We have audited, in accordance with the auditing standards gene rally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units,each major fund, and the aggregate remaining fund information of City of Pasadena, State California (the “City”), as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated December 23 2024.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statement s, we considered the City’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allo w management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. 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 entity’s financial statements will not be prevented, or detected and corrected, on a timely b asis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less s evere than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We identified a certain deficiency in internal control, described in the accompanying schedule of findings and responses as item 2024-001 that we consider to be a significant deficiency.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and ma terial effect on the financial statements.
However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
Attachment B
To the Honorable Mayor and Members of the City Council
City of Pasadena, California
City’s Response to Finding
Government Auditing Standards requires the auditor to perform limited procedures on the City ’s response to the findings identified in our audit and described in the accompany ing schedule of findings and responses. The City’s response was not subjected to the other auditing procedures app lied in the audit of the financial statements and, accordingly, we express no opinion on the response.
Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the e ffectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s inter nal control and compliance. Acco rdingly, this communication is not suitable for any other purpose.
Irvine, California
December 23, 2024
To the Honorable Mayor and Members of the City Council
City of Pasadena, California
SCHEDULE OF FINDINGS AND RESPONSES
Reference Number
2024-001 – Year-End Close and Financial Reporting
Evaluation of Finding
Significant Deficiency
Condition
During the audit, we found the following conditions that result ed in significant audit adjustments to the financial statements:
Accuracy in External Financial Reporting
The year-end closing process wa s not thorough and did not ensur e that account balances were reconciled and accurate in advance of the audit requiring a significant number of adjusting journal entries to correct the final financial statements. It appears these errors were primarily ca used by the trial balance being prepared from data that was not always complete, contained errors and appropriate year-end reconciliations had not been performed.
There were no material adjustments to any opinion unit as a result of these journal entries.
Criteria
Management is responsible for the preparation and fair presenta tion, as well as the accuracy of its financial statements, including disclosures in accordance with accounting principles generally accepted in the United States of America. This includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statement s that are free from material misstatement, whether due to error or fraud.
Cause of Condition
Due to significant volume and detail of general ledger transactions of the City, some processes were not fully executed and reflected in the City trial balance prior to being furnished to the auditors.
Effect or Potential Effect of Condition
Due to the item noted above, there is potential for significant misstatements to be present in the initial trial balance that is provided to the auditors.
Recommendation
The City should continue to enhance and improve their year-end close procedures to ensure the close is complete and reduce the amount of journal entries needed and errors identified after the closing process has been completed.
We suggest management also continue to establish effective revi ew policies and procedures, including but not limited to; apply analytical procedures on the trial balance nu mbers and perform reconciliations of all significant accounts.
Management Response
Management agrees with the finding. While the City has implemented a year-end close checklist that has improved and captured year-end recordings in some areas, further refinement of this checklist and related processes is necessary to ensure a more comprehensive and efficient year-end process.