#5 Review and accept the 2011 Comprehensive Annual Financial Report (CAFR)
ADMINISTRATIVE SERVICES MEMORANDUM
June 28, 2012
TO: City Council
FROM: Patty Lynch, Comptroller
SUBJECT: 2011 Comprehensive Annual Financial Report –Report of Internal Control
Please find attached a copy of our 2011 Comprehensive Annual Financial Report (CAFR) for
Council’s review. The main component of the CAFR is the City’s audited financial statements.
There is also an introductory section which provides background information about the City, its
major initiatives, economic condition, and general information. Following the financial information
there is a series of 18 statistical schedules that primarily show 10-year trend data for items such
as fund balance, revenue trends, and debt capacity.
Wisconsin State Statues require that an annual audit be conducted by an independent certified
public accountant. Baker Tilly Virchow Krause, LLP, Certified Public Accounts, have audited and
issued the opinion that Janesville’s Financial Statements have presented fairly the financial
position of the City, as of December 31, 2011. We request that the Council accept the report
during their meeting scheduled on July 11, 2012.
In addition to the audited financial statements, our auditors have also issued a report which
references our internal controls over financial reporting and compliance with certain provisions of
laws, regulations, contracts, grant agreements, and other financial matters. Please find attached
for Council's review a copy of the City of Janesville’s 2011 Report on Internal Control. In this
report, Baker Tilly Virchow Krause, LLP have reported a material weakness in internal accounting
controls. A material weakness is reported if there is more than a remote likelihood that a material
misstatement will not be prevented or detected by our internal controls.
Internal Accounting Controls
The auditors have reviewed and evaluated the City’s internal controls over significant
accounting transaction cycles. This analysis has identified a weakness in levels of
review during in the year-end audited financial statement preparation.
With all internal controls procedures there needs to be a consideration of the cost of
avoiding the weakness to its related benefit. The City prepares high quality financial
statements, conversion entries, and footnote disclosures for the auditors to review.
However, because of the City’s size, management does not believe it is cost effective
to hire additional staff with the expertise to review all aspects of financial reporting to
scrutinize the statements internally to the same degree that the auditors do later, and
we rely on the auditor for this review.
Purchase Orders and Invoice Approval
During review of the general disbursement procedures, the auditors noted a purchase
order was not signed by the Director of Administrative Services, and a phone bill that
did not have evidence of review and approval on the invoice.
The accounting division implemented new financial software, the New World/Logos
Financial Management System in December 2011. We automated routing for
purchasing orders and invoices within the system to follow the City’s purchasing policy.
The New World FM system has electronic approvals for both purchase orders and
invoices approvals to show compliance with our internal control procedures for
disbursement processing.
The Report on Internal Control also includes required communications with the City Council.
Such items include the auditors’ responsibilities and management’s responsibilities to the audited
financial statements. The auditors also point out that there were no significant difficulties in
dealing with management in performing the audit, and no material audit adjustments were
proposed.
The CAFR is available on the City website www.ci.janesville.wi.us and paper copies are available
at the Hedberg Public Library and in the City Clerk’s office for the public’s review.
Ms. Heather Acker, CPA, Partner, Baker Tilly Virchow Krause, LLP, will be attending the July 9,
2012 Council meeting to give a brief presentation and to address any questions that the Council
may have.
cc: Jacob J. Winzenz, Director of Administrative Services/Assistant City Manager
Eric J Levitt, City Manager
Attachments