HomeMy WebLinkAbout21-22 SAS Audit Letter
December 2, 2022
To the Mayor and City Council Members
City of McHenry
McHenry, Illinois
We have audited the financial statements of the governmental activities, the business-type activities,
each major fund, and the aggregate remaining fund information of City of McHenry (City) as of and for
the year ended April 30, 2022, and have issued our report thereon dated December 2, 2022.
Professional standards require that we advise you of the following matters relating to our audit.
Our Responsibility in Relation to the Financial Statement Audit
As communicated in our engagement letter dated June 15, 2022, our responsibility under generally
accepted auditing standards and, if applicable, Government Auditing Standards and Uniform
Guidance, is to form and express an opinions about whether the financial statements that have been
prepared by management with your oversight are presented fairly, in all material respects, in
accordance with accounting principles generally accepted in the United States of America. Our audit
of the financial statements does not relieve you or management of your respective responsibilities.
Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain
reasonable, rather than absolute, assurance about whether the financial statements are free of
material misstatement. An audit of financial statements includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over
financial reporting. Accordingly, as part of our audit, we considered the internal control of the City
solely for the purpose of determining our audit procedures and not to provide any assurance
concerning such internal control.
We are also responsible for communicating significant matters related to the audit that are, in our
professional judgment, relevant to your responsibilities in overseeing the financial reporting process.
However, we are not required to design procedures for the purpose of identifying other matters to
communicate to you.
Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and timing we previously communicated
to you.
Qualitative Aspects of the Organization’s Significant Accounting Practices
Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A summary of
the significant accounting policies adopted by the City are included in Note 1 to the financial
statements. There have been no initial selection of accounting policies and no changes in significant
accounting policies or their application during fiscal year 2022. No matters have come to our attention
that would require us, under professional standards, to inform you about (1) the methods used to
account for significant unusual transactions and (2) the effect of significant accounting policies in
controversial or emerging areas for which there is a lack of authoritative guidance or consensus.
Significant Accounting Estimates
Accounting estimates are an integral part of the financial statements prepared by management and
are based on management’s current judgment. Those judgments are normally based on 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 markedly from
management’s current judgment. We evaluated the key factors and assumptions used to develop the
estimates and determined that they are reasonable in relation to the financial statements taken as a
whole and in relation to the applicable opinion units. The most sensitive estimate(s) affecting the
financial statements are:
• Management’s estimate of depreciation expense is based on estimated useful lives of the capital
assets held by the City.
• Management’s estimates regarding pension and OPEB liabilities were based on various actuarial
assumptions regarding projected salaries, market trends, and expected mortality.
• Management’s estimates regarding allowances on receivables were based on historical collection
rates.
Financial Statement Disclosures
Certain financial statement disclosures involve significant judgement and are particularly sensitive
because of their significance to financial statement users. The most sensitive disclosures affecting
the City’s financial statements relate to depreciation, pension and OPEB liabilities, and fair value
estimates.
The financial statement disclosures are neutral, consistent, and clear.
Significant Unusual Transactions
For purposes of this communication, professional standards require us to communicate to you
significant unusual transactions identified during our audit. The following significant unusual
transactions identified as a result of our audit procedures were brought to the attention of
management: none noted
Significant Difficulties Encountered during the Audit
We encountered no significant difficulties in dealing with management relating to the performance of
the audit.
Uncorrected and Corrected Misstatements
For purposes of this communication, professional standards require us to accumulate all known and
likely misstatements identified during the audit, other than those that we believe are trivial, and
communicate them to the appropriate level of management. Further, professional standards require
us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant
classes of transactions, account balances or disclosures, and the financial statements as a whole and
each applicable opinion unit. Management has corrected all identified misstatements.
In addition, professional standards require us to communicate to you all material, corrected
misstatements that were brought to the attention of management as a result of our audit procedures.
The attached misstatements that we identified as a result of our audit procedures were brought to the
attention of, and corrected by, management.
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a
matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or
audit matter, which could be significant to the City’s financial statements or the auditor’s report. No
such disagreements arose during the course of the audit.
Circumstances that Affect the Form and Content of the Auditor’s Report
For purposes of this letter, professional standards require that we communicate any circumstances
that affect the form and content of our auditor’s report. None Noted
Representations Requested from Management
We have requested certain written representations from management, which are included in the
attached letter.
Management Consultations with Other Accountants
In some cases, management may decide to consult with other accountants about auditing and
accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation
involves application of an accounting principle to the City’s financial statements or a determination of
the type of auditor’s opinion that may be expressed on those statements, our professional standards
require the consulting accountant to check with us to determine that the consultant has all the relevant
facts. Management informed us that, and to our knowledge, there were no consultations with other
accountants regarding auditing and accounting matters.
Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the City, we generally discuss a variety of
matters, including the application of accounting principles and auditing standards, significant events
or transactions that occurred during the year, operating and regulatory conditions affecting the City,
and operating plans and strategies that may affect the risks of material misstatement. However, none
of the matters discussed resulted in a condition to our retention as the City’s auditors.
Other Matters
We applied certain limited procedures to the required information, which is required supplemental
information (RSI) that supplement the basic financial statements (as listed on the table of contents in
the audit report). 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.
We were engaged to report on supplemental information which accompany the financial statements
but are not RSI. With respect to the supplemental information we made certain inquiries of
management and evaluated the form, content, and methods of preparing the information to determine
that the information complies with accounting principles generally accepted in the United States of
America, the method of preparing it has not changed from the prior period, and the information is
appropriate and complete in relation to our audit of the financial statements. We compared and
reconciled the supplemental information to the underlying accounting records used to prepare the
financial statements or to the financial statements themselves.
Restriction on Use
This report is intended solely for the information and use of the City Council and management of City
of McHenry and is not intended to be, and should not be, used by anyone other than these specified
parties.
Very truly yours,
EDER, CASELLA & CO.
Certified Public Accountants
Client:City of McHenry
Engagement:City of McHenry
Period Ending:4/30/2022
Workpaper:General Fund AJEs Report
Account Description Debit Credit
Adjusting Journal Entries JE # 1
100-2100 ACCOUNTS PAYABLE 3,750.00
100-41-5110 CONTRACTUAL SERVICES 3,750.00
Total 3,750.00 3,750.00
Adjusting Journal Entries JE # 2
100-1201 GRANTS RECEIVABLE 1,841,293.00
100-00-3180 GRANTS 1,841,293.00
Total 1,841,293.00 1,841,293.00
Adjusting Journal Entries JE # 3
100-33-5520 STREET LIGHTING 19,248.00
100-2100 ACCOUNTS PAYABLE 19,248.00
Total 19,248.00 19,248.00
Adjusting Journal Entries JE # 4
100-1345 SALT INVENTORY 122,096.00
100-04-9947 TRANSFER OTHER FUNDS 84,555.00
100-33-6110 MATERIALS & SUPPLIES 37,541.00
Total 122,096.00 122,096.00
I have reviewed and agree with the adjustments above:
Client Signature
Date
To move item to fixed assets account
Reclass/Record ARPA Grant Activity
Record Addtional AP
Record Salt Transfer
8/22/2022
3:18 PM
Client:City of McHenry - City of McHenry
Engagement:City of McHenry
Period Ending:4/30/2022
Trial Balance:200 - Tourism Fund
Workpaper:200 - Tourism Fund AJE's Report
Account Description W/P Ref Debit Credit
Adjusting Journal Entries JE # 1
200-2100 ACCOUNTS PAYABLE 2,000.00
200-00-5110 CONTRACTUAL SERVICES 2,000.00
Total 2,000.00 2,000.00
I have reviewed and agree with the adjustment(s) above:
Client Signature
Date
Adjust AP For portion of invoice for FY23
1 of 1
8/22/2022
3:20 PM
Client:City of McHenry - City of McHenry
Engagement:City of McHenry
Period Ending:4/30/2022
Trial Balance:225 - Alarm Board Fund
Workpaper:225 - Alarm Board Fund - 2
Account Description W/P Ref Debit Credit
225-00-5110 CONTRACTUAL SERVICES 780.00
225-2100 ACCOUNTS PAYABLE 780.00
Total 780.00 780.00
Total Adjusting Journal Entries 780.00 780.00
Total All Journal Entries 780.00 780.00
Signature
Date
Adjusting Journal Entries
Adjusting Journal Entries JE # 1
Adjust AP to actual
1 of 1
9/26/2022
9:51 AM
Client:City of McHenry - City of McHenry
Engagement:City of McHenry
Period Ending:4/30/2022
Trial Balance:270 - Motor Fuel Tax Fund
Workpaper:270 - Motor Fuel Tax Adjusting Journal Entries Report
Account Description W/P Ref Debit Credit
Adjusting Journal Entries JE # 1
270-2100 ACCOUNTS PAYABLE 464.00
270-00-8600 STREETS 464.00
Total 464.00 464.00
Adjusting Journal Entries JE # 2
270-2530 DEFERRED REVENUE 7,293.00
270-00-3150 MFT-ALLOTMENTS FROM STATE 7,293.00
Total 7,293.00 7,293.00
Adjusting Journal Entries JE # 3
270-2530 DEFERRED REVENUE 49,413.00
270-00-3155 REBUILD ILLINOIS GRANT 49,413.00
Total 49,413.00 49,413.00
Adjusting Journal Entries JE # 4
270-00-6110 MATERIALS & SUPPLIES 37,541.00
270-00-9901 TRANSFER GENERAL FUND 84,555.00
270-1345 SALT INVENTORY 122,096.00
Total 122,096.00 122,096.00
I have reviewed and agree with the adjustment(s) above:
Client Signature
Date
Reverse S Curve Project Costs - PBC
Record PBC Entry for May & June High Growth Payments
Remove Rebuild IL Deferred Revenue
Move Salt to General Fund
1 of 1
8/22/2022
3:22 PM
Client:City of McHenry - City of McHenry
Engagement:City of McHenry
Period Ending:4/30/2022
Trial Balance:280 - Developer Donations Fund
Workpaper:280 - Developer Donations Adjusting Journal Entries Report
Account Description W/P Ref Debit Credit
280-2100 ACCOUNTS PAYABLE 40,971.00
280-41-8800 PARK PLAYGROUND IMPROVEMENTS 40,971.00
Total 40,971.00 40,971.00
280-41-8800 PARK PLAYGROUND IMPROVEMENTS 3,750.00
280-2100 ACCOUNTS PAYABLE 3,750.00
Total 3,750.00 3,750.00
Total Adjusting Journal Entries 44,721.00 44,721.00
Total All Journal Entries 44,721.00 44,721.00
Adjusting Journal Entries
Adjusting Journal Entries JE # 1
To reverse non capitlal expenditure in capital account
Adjusting Journal Entries JE # 2
To move item to fixed asset account
1 of 1
9/11/2022
8:47 AM
Client:City of McHenry - City of McHenry
Engagement:City of McHenry
Period Ending:4/30/2022
Trial Balance:510 - Water/Sewer Fund
Workpaper:510 - Water Sewer Adjusting Journal Entries Report
Account Description W/P Ref Debit Credit
Adjusting Journal Entries JE # 1
510-2170 COMPENSATED ABSENCES 5,038.00
510-31-4010 SALARIES-REGULAR 900.00
510-32-4010 SALARIES-REGULAR 3,961.00
510-35-4010 SALARIES - REGULAR 1,977.00
Total 5,938.00 5,938.00
Adjusting Journal Entries JE # 2
510-2500 FUND BALANCE 291,066.00
510-31-8500 UTILITY SYSTEM 291,066.00
Total 291,066.00 291,066.00
Adjusting Journal Entries JE # 3
510-32-7600 LOAN INTEREST 2,067.00
510-2308 WWTP LOAN PAYABLE 2,067.00
Total 2,067.00 2,067.00
Adjusting Journal Entries JE # 4
510-2308 WWTP LOAN PAYABLE 5,879.00
510-32-7600 LOAN INTEREST 5,879.00
Total 5,879.00 5,879.00
Adjusting Journal Entries JE # 5
510-2443 IMRF NET PENSION LIABILITY 362,772.00
510-2448 IMRF - DEFERRED INFLOWS 523,102.00
510-2444 IMRF DEFERRED OUTFLOWS-ACT EVAL 610,601.00
510-2445 IMRF DEFERRED OUTFLOWS-CONT AFTER 42,902.00
510-31-4420 EMPLOYER CONTRIBUTION - IMRF 50,118.00
510-32-4420 EMPLOYER CONTRIBUTION - IMRF 86,795.00
510-35-4420 EMPLOYER CONTRIBUTION - IMRF 95,458.00
Total 885,874.00 885,874.00
Adjusting Journal Entries JE # 6
510-2449 DEFERRED OUTFLOWS - OPEB 91,915.00
510-2450 NET OPEB LIABILITY 142,210.00
510-2451 DEFERRED INFLOWS - OPEB 183,224.00
510-99-9930 OPEB EXPENSE 33,918.00
510-99-9940 OPEB CONTRIBUTIONS 16,983.00
Total 234,125.00 234,125.00
Correct PY Accounts Payable for fixed asset entry made incorrectly in PY
Adjust compensated absences - original entry was using incorrect hourly rates
Adjust Construction Period Interest on IEPA Loan
Adjust IEPA Loan Balance for Amount Not Actually Received from PY
Record GASB 68 IMRF Activity
Record GASB 75 Activity
1 of 2
9/11/2022
8:47 AM
Client:City of McHenry - City of McHenry
Engagement:City of McHenry
Period Ending:4/30/2022
Trial Balance:510 - Water/Sewer Fund
Workpaper:510 - Water Sewer Adjusting Journal Entries Report
Account Description W/P Ref Debit Credit
Adjusting Journal Entries JE # 7
510-1388 ACCUM DEPREC - SYSTEM & EQUIPMEN 7,277.00
510-32-9510 DEPRECIATION EXPENSE 7,277.00
Total 7,277.00 7,277.00
I have reviewed and agree with the adjustment(s) above:
Client Signature
Date
Adjust depreciation for double recorded water plant
2 of 2
Client:City of McHenry
Engagement:City of McHenry
Period Ending:4/30/2022
Workpaper:Utility Improvements Fund AJEs
Account Description W/P Ref Debit Credit
Adjusting Journal Entries JE # 1
580-00-3981 TRANSFER CAPITAL DEVELOPMENT FUN 6,250.00
580-00-3978 TRANSFER FROM WATER SEWER 6,250.00
Total 6,250.00 6,250.00
I have reviewed and agree with the adjustment(s) above:
Client Signature
Date
Adjust transfers between funds
9/11/2022
8:47 AM
Client:City of McHenry - City of McHenry
Engagement:City of McHenry
Period Ending:4/30/2022
Trial Balance:620 - Information Technology Fund
Workpaper:620 - Information Technology Fund AJE Report
Account Description W/P Ref Debit Credit
620-2500 FUND BALANCE 310.00
620-00-5110 CONTRACTUAL SERVICES 310.00
Total 310.00 310.00
Adjusting Journal Entries JE # 2
620-2443 IMRF NET PENSION LIABILITY 94,271.00
620-2445 IMRF DEF OUTFLOWS - CONTR MADE AFTER MEAS 1,367.00
620-00-4420 EMPLOYER CONTRIBUTION - IMRF 40,673.00
620-2444 IMRF DEFERRED OUTLFOWS-ACTUARIAL REPORT 11,886.00
620-2448 IMRF - DEFFERED INFLOWS 43,079.00
Total 95,638.00 95,638.00
Adjusting Journal Entries JE # 3
620-00-9930 OPEB EXPENSE 11,462.00
620-2449 DEFERRED OUTFLOWS - OPEB 22,073.00
620-2450 NET OPEB LIABILITY 4,759.00
620-00-9940 OPEB CONTRIBUTIONS 2,425.00
620-2451 DEFERRED INFLOWS - OPEB 35,869.00
Total 38,294.00 38,294.00
Adjusting Journal Entries JE # 4
620-2308 LESS CURRENT PORTION-LONG TERM DEBT 24,103.00
620-00-3210 INTEREST INCOME 1.00
620-2310 CAPITAL LEASE PAYABLE 24,102.00
Total 24,103.00 24,103.00
I have reviewed and agree with the adjustment(s) above:
Client Signature
Date
Record GASB 68 IMRF Activity
Record GASB 75 Activity
Adjusting Journal Entries JE # 1
Correct Fund Balance Issue Related to AJE from Prior Year
Adjust balances of loan accounts
1 of 1
9/26/2022
9:55 AM
Client:City of McHenry - City of McHenry
Engagement:City of McHenry
Period Ending:4/30/2022
Trial Balance:760 - Police Pension Fund
Workpaper:760 - Police Pension AJE's Report
Account Description W/P Ref Debit Credit
Adjusting Journal Entries JE # 1
760-00-3210 INTEREST INCOME 502.00
760-1125 US BANK TRUST - FMV 502.00
Total 502.00 502.00
Client Signature
Date
Adjust FMV to match bank statement
1 of 1