Submitted By
Steven Drazner, Chief Financial Officer
Reviewed By
LKS
Agenda Item Title
Title
Review and Discuss the Draft Fiscal Year 2017 Comprehensive Annual Financial Report (CAFR) and Supporting Documents
End
Overview
Overview
Consistent with past practice, the Finance Committee of the Village Board will meet to review the draft annual Audit and CAFR for the year ending December 31, 2017. The draft Audit will be presented by the Village’s independent auditing firm, Sikich. Subsequently, the final Audit documents will be presented to the Village Board on Monday, June 25, 2018 for acceptance. The Village is required to file the audit with the State by June 30th.
Body
Staff Recommendation
This meeting is a review only by the Finance Committee. Final adoption is scheduled for the Regular Meeting on June 25, 2018.
Background
Presented for your review and information is the Village’s annual financial audit (CAFR or Comprehensive Financial Annual Report) for the calendar year ending December 31, 2017. The audit was performed by Sikich LLP with Dan Berg as the Partner on the project. Consistent with past practive, also presented is The Auditor’s Communication Letter to the Board of Trustees containing the adjusting entries made in final fieldwork and Management Letter as well as the Communication of Deficiencies Letter.
Pursuant to Section 2-6-3 of the Municipal Code, as soon as practicable at the close of each fiscal year, and no later than six (6) months thereafter, there shall be an independent audit of all accounts of the Village, conducted independently of the Village Manager, made by a competent person authorized to act as an auditor under the laws of the State to be selected by the Board of Trustees.
In addition, acceptance of the audit and CAFR is required prior to submittal to the State, annually by June 30th.
On November 4, 2013, the Board authorized a contract with Sikich LLP for independent audit services through FY2015 with two optional years for FY2016 and FY2017. On August 7, 2017, the Board approved extending the original agreement to include auditing services for final optional year FY2017 in the amount of $65,279. Please note that finance staff prepared an audit services RFP to cover fiscal years 2018, 2019, 2020 and two optional years 2021 and 2022 which has been distributed and an auditor recommendation will be brought to the Board in August. It should be emphasized that whichever auditor is ultimately selected by the Board will remain completely independent from staff with the sole purpose of issuing a report to the Board on annual financial results and internal control issues/material deficiencies.
In addition to the CAFR, Sikich has released the Auditor’s Communication to the Board of Trustees which includes a description of the audit process, adjusting journal entries made pursuant to the audit as well as the Management Letter which is a report intended to be used by the Board of Trustees, although the Village releases this document publicly as well. The Management Letter generally identifies matters that the independent auditor believes will assist the organization moving forward.
There were no auditor comments in the Management Letter for the Fiscal Year ending December 31, 2017 which was a significant achievement.
In addition, the auditors issue a Communication of Deficiencies in Internal Control report which is typically only intended for village management but is being included as part of this agenda item for complete transparency. The purpose of this report is to provide management with feedback in areas where internal controls can be improved or when less severe issues are discovered by the auditors not warranting a management letter comment. For the year ending December 31, 2017, there were four such comments focused on water pump-to-bill ratios, Fund accumulated deficits, budgetary compliance, and payroll approval. The full deficiency report containing staff responses to these three comments is included herein.
The overall purpose of the financial audit is to determine if the financial records and reports of the Village are presented fairly and whether the Village has complied with applicable laws and regulations. The auditor’s opinion letter located in the CAFR conveys to the public that the statements are presented fairly, in all material respects, in accordance with US generally accepted accounting principles.
Finally and of upmost importance, Sikich LLP has provided the Village with an unqualified opinion of the Village’s financial position which is the best level of assurance an auditor can provide at the conclusion of an audit. Staff will also apply once again for the 2017 GFOA Certificate of Achievement Award for Financial Reporting Excellence.