City of Sebastopol
Presentation to the City Council
Agenda
• Deliverables and Scope of the Audit
• Areas of Primary Audit Risk
• Auditor’s Report
• Required Communications
• New Accounting Standards
• Conclusion & Discussion/Questions
2 Deliverables and Scope of the Audit
3 • Independent Auditor’s Report on the City of Sebastopol’s Basic Financial Statements (BFS). • Independent Auditor’s Reports on Internal Control Over Financial Reporting and on Compliance and Other Matters.
• Agreed-Upon Procedures on Appropriation Limit Schedule. • Communications with Those Charged with Governance.
• Letter used to summarize communication of various significant matters to those charged with governance.
• Annual Street Report to State Controller’s Office.
• Annual Financial Transactions Reports to State Controller’s Office for City.
Areas of Primary Audit Risk
4 The risk of management override of controls is addressed by the following procedures:
• Assignment of audit staff based on consideration of audit risk. • Procedures to incorporate an element of unpredictability in the audit from period to period.
• Consideration of the selection and application of significant accounting principles. • Examination of journal entries.
• Review of accounting estimates for bias.
• Evaluation of business rationale for unusual transactions. • Evaluation of the appropriateness of fraud-related inquiries performed.
Revenues & Receivables (Taxes, Grants, Notes, etc.) – Improper Revenue Recognitions:
• Governmental Funds: Confirm/validate property taxes, sales taxes, transient occupancy taxes, franchise taxes & other significant revenues/receivables. • Enterprise Funds: Perform analytical procedures
Auditor’s Report
5 • Audit performed in accordance with Generally Accepted Auditing Standards • Audit performed in accordance with Government Auditing Standards Auditing Standards
• Financial statements are fairly presented in all material respects • Significant accounting policies have been consistently applied • Estimates are reasonable
• Disclosures are properly reflected in the financial statements Unmodified opinion
Required Communications
6 Auditor’s Responsibilities
Opinion on whether financial statements are fairly
stated in accordance with U.S. GAAP
Evaluate internal control over financial reporting
including tone at the top
Evaluate compliance with laws, contracts, and grants.
Ensure financial statements are clear and transparent
Communicate with the governing body
Management’s Responsibilities
Management is responsible for the financial
statements
Establish and maintain internal control over
financial reporting
Making all financial records available to us
Establish internal control to prevent and detect fraud
Inform us of all known and suspected fraud
Comply with laws and regulations
Take corrective action on audit findings
Required Communications
7 • It is our responsibility to maintain independence
• We will maintain our independence by strict adherence to the AICPA and the Board of Accountancy rules and regulations
• No services performed that could affect our independence other than preparing the financial statements.
Independence
• Within the time frame communicated to the City in our engagement letters.
Timing of the Audit
• The City adopted the following new pronouncements during the year:
• GASB Statement No. 100 – Accounting Changes and Error Corrections Significant Accounting Policies and Unusual Transactions Required Communications
8 • Capital assets depreciation and useful life
• Pension and OPEB related estimates
Management Judgment and Accounting Estimates
• No difficulties encountered.
Difficulties Encountered in Performing the Audit
• Management has posted all proposed audit adjustments.
Significant Audit Adjustments and Unadjusted Differences • No material weaknesses identified during our audit.
Deficiencies in Internal Control over Financial Reporting New Accounting Standards
9 2025
• GASB Statement No. 101 – Compensated Absences
• GASB Statement No. 102 – Certain Risk Disclosures
2026
• GASB Statement No. 103 – Financial Reporting Model Improvements • GASB Statement No. 104 – Disclosure of Certain Capital Assets Thank You for Allowing us to
Provide Audit Services to the
City of Sebastopol.