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07-07-2012 Acceptance of 2011 Comprehensive Annual Financial ReportTo: Honorable Mayor and Town Council Thru: Patty McKenny, Acting Town Manager From: Scott Wright, Asst. Town Manager — Finance Legal: Eric Heil, Town Attorney Date: June 7, 2012 Re: Acceptance of 2011 Comprehensive Annual Financial Report Initials ck A representative from McMahan and Associates, CPAs, the Town's independent certified public accountants, will be here Tuesday to present the Town's comprehensive amlual financial report and management letter to Council. Section 12.11 of the Town's Charter requires an independent audit of the Town's accounts by certified public accountants at least annually. Acceptance of the 2011 comprehensive annual financial report (CAFR) by the Council fulfills this requirement. In addition to meeting the Town's Charter requirements, the Town also uses the CAFR to document that it has met the compliance requirements of the Single Audit Act and U.S. Office of Management and Budget regarding awards of major federal grants, that it has met the standards applicable to financial audits as issued by the Comptroller General of the United States and that information provided in the CAFR meets the continuing disclosure requirements of the Town's various debt issuances. The Town provides its CAFR to various users of financial reports including: investors in Town bonds, creditors such as banks and underwriters, oversight bodies such as the Colorado State Auditor, and other governmental entities. Finally, the Town participates in the Government Finance Officer's Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting and has received this certificate for last twenty years in a row. I recommend that the Council accept the Town's 2011 comprehensive annual financial report. Attachments: A -2011 Annual Comprehensive Financial Report B — McMahan and Associates Management Letter 0 Page 2 Town Council Town of Avon, Colorado P.O. Box 975 Avon, CO 81620 We have audited the financial statements of Town of Avon, Colorado for the year ended December 31, 2011. Professional standards require that we provide you with the following information related to our audit. Qualitative Aspects of Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Town of Avon, Colorado are described in the Notes to the 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 the governmental unit 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 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 financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate(s) affecting the financial statements was (were): Estimated useful lives for depreciation on fixed assets: Management's estimate of depreciation is based on industry practice and experience. We evaluated the key factors and assumptions used to develop the useful lives used in determining depreciation and found that it is reasonable in relation to the financial statements taken as a whole. Allowance for Doubtful Accounts: The Town has a number of receivables from developers and others. Some of the amounts owed to the Town may be uncollectable either due to economic circumstances or ongoing litigation. The Town has recorded an allowance for doubtful accounts to reflect any lower collectable amounts than anticipated. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements prior to audit procedures being performed. None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. I h�iU l �c � ,Vlent per: , imericc7n Institute o�C et�ifle d ecountvnts D. JERRY MCMAHAN, C.P.A. DANIEL R. CUDAHY, C.P.A. PAUL J. BACKES, C.P.A. MICHAEL N. JENKINS, C.A., C.P.A. AVON ASPEN FRISCO (970) 845 -8800 (970) 544 -3996 (970) 668 -348 1 MCMAHAN AND ASSOCIATES, L.L.C. Certified Public Accountants and Consultants WEB SITE: WWW.MCMAHANCPA.COM CHAPEL SQUARE, BLDG C MAIN OFFICE: (970) 845 -8800 245 CHAPEL PLACE, SUITE 300 FACSIMILE: (970) 845-8 108 P.O. Box 5850, AVON, CO 8 1 620 E -MAIL: MCMAHAN @MCMAHANCPA.COM Town Council Town of Avon, Colorado P.O. Box 975 Avon, CO 81620 We have audited the financial statements of Town of Avon, Colorado for the year ended December 31, 2011. Professional standards require that we provide you with the following information related to our audit. Qualitative Aspects of Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Town of Avon, Colorado are described in the Notes to the 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 the governmental unit 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 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 financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate(s) affecting the financial statements was (were): Estimated useful lives for depreciation on fixed assets: Management's estimate of depreciation is based on industry practice and experience. We evaluated the key factors and assumptions used to develop the useful lives used in determining depreciation and found that it is reasonable in relation to the financial statements taken as a whole. Allowance for Doubtful Accounts: The Town has a number of receivables from developers and others. Some of the amounts owed to the Town may be uncollectable either due to economic circumstances or ongoing litigation. The Town has recorded an allowance for doubtful accounts to reflect any lower collectable amounts than anticipated. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements prior to audit procedures being performed. None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. I h�iU l �c � ,Vlent per: , imericc7n Institute o�C et�ifle d ecountvnts D. JERRY MCMAHAN, C.P.A. DANIEL R. CUDAHY, C.P.A. PAUL J. BACKES, C.P.A. MICHAEL N. JENKINS, C.A., C.P.A. AVON ASPEN FRISCO (970) 845 -8800 (970) 544 -3996 (970) 668 -348 1 Town Council Town of Avon, Colorado 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 financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit Management Representations As is required in an audit engagement we have requested certain representations from management that are included in the management representation letter. Recommendations We noted certain matters relating to opportunities for improvement of internal controls and day -to -day operations, which are presented for your consideration below: ® Currently, the Court Clerk has access to all functions of the citation revenue cycle, including inputting new citations, amending the citation and accepting cash. In order to maintain strong internal control, these duties should be segregated. We recommend that the Town either segregate the function of recording cash transactions and citations from cash handling, or to have a supervisor to review an audit log report on a regular basis, to monitor any voids or adjustments to citations. Review of this audit log should be documented on the face of this report. This letter is intended solely for the information and use of the Town Council, management, and others within the organization and is not intended to be, and should not be, used by anyone other than those specified parties. Sincerely, r A-- McMahan and Associates, L.L.C. June 12, 2012 To: Honorable Mayor and Town Council Initials Thru: Patty McKenny, Acting Town Manager From: Scott Wright, Asst. Town Manager — Finance Legal: Eric Heil, Town Attorney i Date: June 7, 2012 Re: Acceptance of 2011 Comprehensive Annual Financial Report A representative from McMahan and Associates, CPAs, the Town's independent certified public accountants, will be here Tuesday to present the Town's comprehensive annual financial report and management letter to Council. Section 12.11 of the Town's Charter requires an independent audit of the Town's accounts by certified public accountants at least annually. Acceptance of the 2011 comprehensive annual financial report (CAFR) by the Council fulfills this requirement. In addition to meeting the Town's Charter requirements, the Town also uses the CAFR to document that it has met the compliance requirements of the Single Audit Act and U.S. Office of Management and Budget regarding awards of major federal grants, that it has met the standards applicable to financial audits as issued by the Comptroller General of the United States and that information provided in the CAFR meets the continuing disclosure requirements of the Town's various debt issuances. The Town provides its CAFR to various users of financial reports including: investors in Town bonds, creditors such as banks and underwriters, oversight bodies such as the Colorado State Auditor, and other governmental entities. Finally, the Town participates in the Government Finance Officer's Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting and has received this certificate for last twenty years in a row. I recommend that the Council accept the Town's 2011 comprehensive annual financial report. 1��°°~ Attachments: A — 2011 Annual Comprehensive Financial Report B — McMahan and Associates Management Letter ® Page 2 MCMAHAN AND ASSOCIATES, L.L.C. Certified Public Accountants and Consultants CHAPEL SQUARE, BLDG C 245 CHAPEL PLACE, SUITE 300 P.O. Box 5850, AVON, CO 8 1 620 Town Council Town of Avon, Colorado P.O. Box 975 Avon, CO 81620 WEB SITE: WWW.MCMAHANCPA.COM MAIN OFFICE: (970) 845-8800 FACSIMILE: (970) 845-8 108 E-MAIL: MCMAHAN @MCMAHANCPA.COM We have audited the financial statements of Town of Avon, Colorado for the year ended December 31, 2011. Professional standards require that we provide you with the following information related to our audit. Qualitative Aspects of Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Town of Avon, Colorado are described in the Notes to the 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 the governmental unit 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 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 financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate(s) affecting the financial statements was (were): Estimated useful lives for depreciation on fixed assets: Management's estimate of depreciation is based on industry practice and experience. We evaluated the key factors and assumptions used to develop the useful lives used in determining depreciation and found that it is reasonable in relation to the financial statements taken as a whole. Allowance for Doubtful Accounts: The Town has a number of receivables from developers and others. Some of the amounts owed to the Town may be uncollectable either due to economic circumstances or ongoing litigation. The Town has recorded an allowance for doubtful accounts to reflect any lower collectable amounts than anticipated. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements prior to audit procedures being performed. None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. �lemhcr: ,- �n�aricnn lnsiitirte of (vertif ed public Accountants D. JERRY MCMAHAN, C.P.A. DANIEL R. CUDAHY, C.P.A. PAUL J. BACKES, C.P.A. MICHAEL N. JENKINS, C.A., C.P.A. AVON ASPEN FRISCO (970) 84S -8800 (970) 544 -3996 (970) 668 -348 1 Town Council Town of Avon, Colorado 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 financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit Management Representations As is required in an audit engagement we have requested certain representations from management that are included in the management representation letter. Recommendations We noted certain matters relating to opportunities for improvement of internal controls and day -to -day operations, which are presented for your consideration below: ® Currently, the Court Clerk has access to all functions of the citation revenue cycle, including inputting new citations, amending the citation and accepting cash. In order to maintain strong internal control, these duties should be segregated. We recommend that the Town either segregate the function of recording cash transactions and citations from cash handling, or to have a supervisor to review an audit log report on a regular basis, to monitor any voids or adjustments to citations. Review of this audit log should be documented on the face of this report. This letter is intended solely for the information and use of the Town Council, management, and others within the organization and is not intended to be, and should not be, used by anyone other than those specified parties. Sincerely, McMahan and Associates, L.L.C. June 12, 2012 To: Honorable Mayor and Town Council Thru: Patty McKenny, Acting Town Manager From: Scott Wright, Asst. Town Manager — Finance Legal: Eric Heil, Town Attorney Date: June 7, 2012 Re: Acceptance of 2011 Comprehensive Annual Financial Report Initials `kt rQ �~:� A representative from McMahan and Associates, CPAs, the Town's independent certified public accountants, will be here Tuesday to present the Town's comprehensive annual financial report and management letter to Council. Section 12.11 of the Town's Charter requires an independent audit of the Town's accounts by certified public accountants at least annually. Acceptance of the 2011 comprehensive annual financial report (CAFR) by the Council fulfills this requirement. In addition to meeting the Town's Charter requirements, the Town also uses the CAFR to document that it has met the compliance requirements of the Single Audit Act and U.S. Office of Management and Budget regarding awards of major federal grants, that it has met the standards applicable to financial audits as issued by the Comptroller General of the United States and that information provided in the CAFR meets the continuing disclosure requirements of the Town's various debt issuances. The Town provides its CAFR to various users of financial reports including: investors in Town bonds, creditors such as banks and underwriters, oversight bodies such as the Colorado State Auditor, and other governmental entities. Finally, the Town participates in the Government Finance Officer's Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting and has received this certificate for last twenty years in a row. I recommend that the Council accept the Town's 2011 comprehensive annual financial report. Attachments: A — 2011 Annual Comprehensive Financial Report B — McMahan and Associates Management Letter ® Page 2 Town Council Town of Avon, Colorado P.O. Box 975 Avon, CO 81620 We have audited the financial statements of Town of Avon, Colorado for the year ended December 31, 2011. Professional standards require that we provide you with the following information related to our audit. Qualitative Aspects of Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Town of Avon, Colorado are described in the Notes to the 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 the governmental unit 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 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 financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate(s) affecting the financial statements was (were): Estimated useful lives for depreciation on fixed assets: Management's estimate of depreciation is based on industry practice and experience. We evaluated the key factors and assumptions used to develop the useful lives used in determining depreciation and found that it is reasonable in relation to the financial statements taken as a whole. Allowance for Doubtful Accounts: The Town has a number of receivables from developers and others. Some of the amounts owed to the Town may be uncollectable either due to economic circumstances or ongoing litigation. The Town has recorded an allowance for doubtful accounts to reflect any lower collectable amounts than anticipated. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements prior to audit procedures being performed. None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. Mci,b, ~ :67c)-ic,7, h7s1i1111e of derti_f d 11, lic Accoimt,ws D. JERRY MCMAHAN, C.P.A. DANIEL R. CUDAHY, C.P.A. PAUL J. BACKES, C.P.A. MICHAEL N. JENKINS, C.A., C.P.A. AVON ASPEN FRISCO (970) 845 -8800 (970) 544 -3996 (970) 668-3481 MCMAHAN AND ASSOCIATES, L.L.C. 4 Certified Public Accountants and Consultants WEB SITE: WWW.MCMAHANCPA.COM CHAPEL SOUARE, BLDG C MAIN OFFICE: (970) 845-8800 245 CHAPEL PLACE, SUITE 300 FACSIMILE: (970) 845-8 108 P.O. BOX 5850, AVON, CO 81620 E -MAIL: MCMAHANQMCMAHANCPA.COM Town Council Town of Avon, Colorado P.O. Box 975 Avon, CO 81620 We have audited the financial statements of Town of Avon, Colorado for the year ended December 31, 2011. Professional standards require that we provide you with the following information related to our audit. Qualitative Aspects of Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Town of Avon, Colorado are described in the Notes to the 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 the governmental unit 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 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 financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate(s) affecting the financial statements was (were): Estimated useful lives for depreciation on fixed assets: Management's estimate of depreciation is based on industry practice and experience. We evaluated the key factors and assumptions used to develop the useful lives used in determining depreciation and found that it is reasonable in relation to the financial statements taken as a whole. Allowance for Doubtful Accounts: The Town has a number of receivables from developers and others. Some of the amounts owed to the Town may be uncollectable either due to economic circumstances or ongoing litigation. The Town has recorded an allowance for doubtful accounts to reflect any lower collectable amounts than anticipated. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements prior to audit procedures being performed. None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. Mci,b, ~ :67c)-ic,7, h7s1i1111e of derti_f d 11, lic Accoimt,ws D. JERRY MCMAHAN, C.P.A. DANIEL R. CUDAHY, C.P.A. PAUL J. BACKES, C.P.A. MICHAEL N. JENKINS, C.A., C.P.A. AVON ASPEN FRISCO (970) 845 -8800 (970) 544 -3996 (970) 668-3481 Town Council Town of Avon, Colorado 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 financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit Management Representations As is required in an audit engagement we have requested certain representations from management that are included in the management representation letter. Recommendations We noted certain matters relating to opportunities for improvement of internal controls and day -to -day operations, which are presented for your consideration below: ® Currently, the Court Clerk has access to all functions of the citation revenue cycle, including inputting new citations, amending the citation and accepting cash. In order to maintain strong internal control, these duties should be segregated. We recommend that the Town either segregate the function of recording cash transactions and citations from cash handling, or to have a supervisor to review an audit log report on a regular basis, to monitor any voids or adjustments to citations. Review of this audit log should be documented on the face of this report. This letter is intended solely for the information and use of the Town Council, management, and others within the organization and is not intended to be, and should not be, used by anyone other than those specified parties. Sincerely, McMahan and Associates, L.L.C. June 12, 2012 z To: Honorable Mayor and Town Council Thru: Patty McKenny, Acting Town Manager From: Scott Wright, Asst. Town Manager — Finance Legal: Eric Heil, Town Attorney Date: June 7, 2012 Re: Acceptance of 2011 Comprehensive Annual Financial Report Initials n A representative from McMahan and Associates, CPAs, the Town's independent certified public accountants, will be here Tuesday to present the Town's comprehensive annual financial report and management letter to Council. Section 12.11 of the Town's Charter requires an independent audit of the Town's accounts by certified public accountants at least annually. Acceptance of the 2011 comprehensive annual financial report (CAFR) by the Council fulfills this requirement. In addition to meeting the Town's Charter requirements, the Town also uses the CAFR to document that it has met the compliance requirements of the Single Audit Act and U.S. Office of Management and Budget regarding awards of major federal grants, that it has met the standards applicable to financial audits as issued by the Comptroller General of the United States and that information provided in the CAFR meets the continuing disclosure requirements of the Town's various debt issuances. The Town provides its CAFR to various users of financial reports including: investors in Town bonds, creditors such as banks and underwriters, oversight bodies such as the Colorado State Auditor, and other governmental entities. Finally, the Town participates in the Government Finance Officer's Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting and has received this certificate for last twenty years in a row. I recommend that the Council accept the Town's 2011 comprehensive annual financial report. Attachments: A -2011 Annual Comprehensive Financial Report B — McMahan and Associates Management Letter 0 Page 2 MCMAHAN AND AssociATES, L.L.C. Certified Public Accountants and Consultants WEB SITE: WWW.MCMAHANCPA.COM CHAPEL SQUARE, BLDG C MAIN OFFICE: (970) 845 -8800 245 CHAPEL PLACE, SUITE 300 FACSIMILE: (970) 845 -8 108 P.O. BOX 5850, AVON, CO 8 1 620 E -MAIL: MCMAHAN gMCMAHANCPA.COM Town Council Town of Avon, Colorado P.O. Box 975 Avon, CO 81620 We have audited the financial statements of Town of Avon, Colorado for the year ended December 31, 2011. Professional standards require that we provide you with the following information related to our audit. Qualitative Aspects of Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Town of Avon, Colorado are described in the Notes to the 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 the governmental unit 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 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 financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate(s) affecting the financial statements was (were): Estimated useful lives for depreciation on fixed assets: Management's estimate of depreciation is based on industry practice and experience. We evaluated the key factors and assumptions used to develop the useful lives used in determining depreciation and found that it is reasonable in relation to the financial statements taken as a whole. Allowance for Doubtful Accounts: The Town has a number of receivables from developers and others. Some of the amounts owed to the Town may be uncollectable either due to economic circumstances or ongoing litigation. The Town has recorded an allowance for doubtful accounts to reflect any lower collectable amounts than anticipated. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements prior to audit procedures being performed. None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. ,A'iembe Americ'm i17St7fllt8 of c tifiecl i,ud%ic 1-kCC011)71177I1S D. JERRY MCMAHAN, C.P.A. DANIEL R. CUDAHY, C.P.A. PAUL J. BACKES, C.P.A. MICHAEL N. JENKINS, C.A., C.P.A. AVON ASPEN FRISCO (970) 845 -8800 (970) 544 -3996 (970) 668 -348 1 Town Council Town of Avon, Colorado 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 financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit Management Representations As is required in an audit engagement we have requested certain representations from management that are included in the management representation letter. Recommendations We noted certain matters relating to opportunities for improvement of internal controls and day -to -day operations, which are presented for your consideration below: ® Currently, the Court Clerk has access to all functions of the citation revenue cycle, including inputting new citations, amending the citation and accepting cash. In order to maintain strong internal control, these duties should be segregated. We recommend that the Town either segregate the function of recording cash transactions and citations from cash handling, or to have a supervisor to review an audit log report on a regular basis, to monitor any voids or adjustments to citations. Review of this audit log should be documented on the face of this report. This letter is intended solely for the information and use of the Town Council, management, and others within the organization and is not intended to be, and should not be, used by anyone other than those specified parties. Sincerely, McMahan and Associates, L.L.C. June 12, 2012 To: Honorable Mayor and Town Council Initials Thru: Patty McKenny, Acting Town Manager From: Scott Wright, Asst. Town Manager — Finance Uw�n—�— Legal: Eric Heil, Town Attorney (l PC Bate: June 7, 2012 Re: Acceptance of 2011 Comprehensive Annual Financial Report A representative from McMahan and Associates, CPAs, the Town's independent certified public accountants, will be here Tuesday to present the Town's comprehensive annual financial report and management letter to Council. Section 12.11 of the Town's Charter requires an independent audit of the Town's accounts by certified public accountants at least annually. Acceptance of the 2011 comprehensive annual financial report (CAFR) by the Council fulfills this requirement. In addition to meeting the Town's Charter requirements, the Town also uses the CAFR to document that it has met the compliance requirements of the Single Audit Act and U.S. Office of Management and Budget regarding awards of major federal grants, that it has met the standards applicable to financial audits as issued by the Comptroller General of the United States and that information provided in the CAFR meets the continuing disclosure requirements of the Town's various debt issuances. The Town provides its CAFR to various users of financial reports including: investors in Town bonds, creditors such as banks and underwriters, oversight bodies such as the Colorado State Auditor, and other governmental entities. Finally, the Town participates in the Government Finance Officer's Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting and has received this certificate for last twenty years in a row. i{- ,tit f.i €' C�i I recommend that the Council accept the Town's 2011 comprehensive annual financial report. Attachments: A — 2011 Annual Comprehensive Financial Report B — McMahan and Associates Management Letter 3 MCMAHAN AND ASS®CIATES, L.L.C. Certified Public Accountants and Consultants CHAPEL SQUARE, BLDG C 245 CHAPEL PLACE, SUITE 300 P.O. Box 5850, AVON, CO 8 1 620 Town Council Town of Avon, Colorado P.O. Box 975 Avon, CO 81620 WEB SITE: WWW.MCMAHANCPA.COM MAIN OFFICE: (970) 845 -8800 FACSIMILE: (970) 845 -8 1 08 E-MAIL: MCMAHAN@Q MCMAHANCPA.COM We have audited the financial statements of Town of Avon, Colorado for the year ended December 31, 2011. Professional standards require that we provide you with the following information related to our audit. Qualitative Aspects of Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Town of Avon, Colorado are described in the Notes to the 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 the governmental unit 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 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 financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate(s) affecting the financial statements was (were): Estimated useful lives for depreciation on fixed assets. Management's estimate of depreciation is based on industry practice and experience. We evaluated the key factors and assumptions used to develop the useful lives used in determining depreciation and found that it is reasonable in relation to the financial statements taken as a whole. Allowance for Doubtful Accounts: The Town has a number of receivables from developers and others. Some of the amounts owed to the Town may be uncollectable either due to economic circumstances or ongoing litigation. The Town has recorded an allowance for doubtful accounts to reflect any lower collectable amounts than anticipated. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements prior to audit procedures being performed. None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. Al,m7be 67,ic,,7 bistit,tc of ccrtif,d hubiic �cc..,h is D. JERRY MCMAHAN, C.P.A. DANIEL R. CUDAHY, C.P.A. PAUL J. BACKES, C.P.A. MICHAEL N. JENKINS, C.A., C.P.A. AVON ASPEN FRISCO (970) 845 -8800 (970) 544 -3996 (970) 668-3481 Town Council Town of Avon, Colorado 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 financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit Management Representations As is required in an audit engagement we have requested certain representations from management that are included in the management representation letter. Recommendations We noted certain matters relating to opportunities for improvement of internal controls and day -to -day operations, which are presented for your consideration below: ® Currently, the Court Clerk has access to all functions of the citation revenue cycle, including inputting new citations, amending the citation and accepting cash. In order to maintain strong internal control, these duties should be segregated. We recommend that the Town either segregate the function of recording cash transactions and citations from cash handling, or to have a supervisor to review an audit log report on a regular basis, to monitor any voids or adjustments to citations. Review of this audit log should be documented on the face of this report. This letter is intended solely for the information and use of the Town Council, management, and others within the organization and is not intended to be, and should not be, used by anyone other than those specified parties. Sincerely, McMahan and Associates, L.L.C. June 12, 2012