Single Audit 2017
City of Encinitas
Encinitas, California
Single Audit and
Independent Auditors’ Reports
For the Year Ended June 30, 2017
City of Encinitas
Table of Contents
Page
Independent Auditors’ Report on Internal Control over Financial Reporting
and on Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards ............................................... 1
Independent Auditors’ Report on Compliance for Each Major Federal Program
and on Internal Control Over Compliance Required by the Uniform Guidance ......................... 3
Schedule of Expenditures of Federal Awards .......................................................................................... 7
Notes to the Schedule of Expenditures of Federal Awards ...................................................................... 8
Schedule of Findings and Questioned Costs ......................................................................................... 10
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INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND
ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of City Council
of the City of Encinitas
Encinitas, California
We have audited, in accordance with the auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States, the financial statements of the governmental
activities, the business-type activities, each major fund, and the aggregate remaining fund information of the
City of Encinitas, California (the “City”) as of and for the year ended June 30, 2017, and the related notes to
the financial statements, which collectively comprise the City’s basic financial statements, and have issued
our report thereon dated December 13, 2017.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control
over financial reporting (“internal control”) to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose
of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express
an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management
or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the entity’s
financial statements will not be prevented, or detected and corrected on a timely basis. A significant
deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a
material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses
may exist that have not been identified.
4365 Executive Drive, Suite 710, San Diego, California 92121
Tel: 858-242-5100 • Fax: 858-242-5150
www.pungroup.com
3939352 Pun & McGeady_L_final.pdf 2 1/14/14 3:48 PM
To the Honorable Mayor and Members of City Council
of the City of Encinitas
Encinitas, California
Page 2
2
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City's financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal
control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this
communication is not suitable for any other purpose.
San Diego, California
December 13, 2017
INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM
AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE
To the Honorable Mayor and Members of City Council
of the City of Encinitas
Encinitas, California
Report on Compliance for Each Major Federal Program
We have audited the City of Encinitas’ (the “City”) compliance with the types of compliance requirements
described in the OMB Compliance Supplement that could have a direct and material effect on each of the
City’s major federal programs for the year ended June 30, 2017. The City’s major federal programs are
identified in the summary of the auditor's results section of the accompanying schedule of findings and
questioned costs.
Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and conditions
of its federal awards applicable to its federal programs.
Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for each of the City’s major federal programs
based on our audit of the types of compliance requirements referred to above. We conducted our audit of
compliance in accordance with auditing standards generally accepted in the United States of America; the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal
Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and
perform the audit to obtain reasonable assurance about whether noncompliance with the types of
compliance requirements referred to above that could have a direct and material effect on a major federal
program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with
those requirements and performing such other procedures as we considered necessary in the
circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal
program. However, our audit does not provide a legal determination of the City’s compliance.
Opinion on Each Major Federal Program
In our opinion, the City complied, in all material respects, with the types of compliance requirements
referred to above that could have a direct and material effect on each of its major federal programs for the
year ended June 30, 2017.
4365 Executive Drive, Suite 710, San Diego, California 92121
Tel: 858-242-5100 • Fax: 858-242-5150
www.pungroup.com
3939352 Pun & McGeady_L_final.pdf 2 1/14/14 3:48 PM
To the Honorable Mayor and Members of City Council
of the City of Encinitas
Encinitas, California
Page 2
4
Report on Internal Control Over Compliance
Management of the City is responsible for establishing and maintaining effective internal control over
compliance with the types of compliance requirements referred to above. In planning and performing our
audit of compliance, we considered the City’s internal control over compliance with the types of requirements
that could have a direct and material effect on each major federal program to determine the auditing
procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance
for each major federal program and to test and report on internal control over compliance in accordance with
the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal
control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City’s internal
control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a
federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or
combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility
that material noncompliance with a type of compliance requirement of a federal program will not be
prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over
compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of
compliance requirement of a federal program that is less severe than a material weakness in internal control
over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control over compliance
that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal
control over compliance that we consider to be material weaknesses. However, material weaknesses may
exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of
internal control over compliance and the results of that testing based on the requirements of the Uniform
Guidance. Accordingly, this report is not suitable for any other purpose.
To the Honorable Mayor and Members of City Council
of the City of Encinitas
Encinitas, California
Page 3
5
Schedule of Expenditures of Federal Awards
We have audited the financial statements of the governmental activities, the business-type activities, each
major fund, and the aggregate remaining fund information of the City as of and for the year ended June 30,
2017, and have issued our report thereon dated December 13, 2017 which contained an unmodified opinion
on those financial statements. Our audit was conducted for the purpose of forming our opinion on the
Commission’s financial statements. The accompanying Schedule of Expenditures of Federal Awards, as
required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and
is not a required part of the financial statements. Such information is the responsibility of management and
was derived from and relates directly to the underlying accounting and other records used to prepare the
financial statements. The information has been subjected to the auditing procedures applied in the audit of
the basic financial statements and certain other procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the financial statements
or to the financial statements themselves, and other additional procedures in accordance with auditing
standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures
of Federal Awards is fairly stated in all material respects in relation to the basic financial statements as a
whole.
San Diego, California
December 13, 2017
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City of Encinitas
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2017
See accompanying Notes to the Schedule of Expenditures of Federal Awards.
7
Federal Grant Amount
CFDA Identification Federal Provided to
Number Number Expenditures Subrecipients
U.S. Department of Housing and Urban Development
Direct Programs:
CDBG Entitlement Grant Cluster:
Community Development Block Grant 14.218 B-13/14/16-MC-06-0574 470,930$ 116,070$
Housing Voucher Cluster:
Section 8 Housing Choice Vouchers 14.871 CA155VO 1,243,047 -
Total U.S. Housing and Urban Development 1,713,977 116,070
U.S. Department of Health and Human Services
Aging Cluster:
Title III - C1 Congregate Meals 93.045 547764 44,081 -
Title III - B Transportation 93.044 547764 9,340 -
Title III - NSIP C1 Incentive 93.053 547764 7,760 -
Total Aging Cluster 61,181 -
Total U.S. Department of Health and Human Services 61,181 -
U.S. Department of Justice
Passed through the City of San Diego:
Justice Assistance Grant Program 16.738 2016-DJ-BX-0037 10,164 -
Total U.S. Department of Justice 10,164 -
U.S. Department of Transportation
Passed through the California Department of Transportation
Highway Planning and Construction Cluster:
Storm Drain and Slope Repairs 20.205 ER 4817(004)60,453 -
Highway Safety Impprovement Program 20.205 HSIP-5446(018-020)697,018 -
Total Highway Planning and Construction Cluster 757,471 -
Total U.S. Department of Transportation 757,471 -
Total Expenditures of Federal Awards 2,542,793$ 116,070$
Federal Grantor/Pass - Through
Grantor/Program Title
Passed through the County of San Diego Health and
Human Services Agency:
City of Encinitas
Notes to the Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2017
8
Note 1 – Reporting Entity
The City of Encinitas (the City) was incorporated on October 1, 1986, pursuant to an election approving the
San Dieguito Reorganization Plan, which consisted primarily of the detachment of territory from the Cardiff
area and the annexation of the same territory to the City of Solana Beach.
The reporting entity of the City includes the accounts of the City, as the primary government, and the
following blended component units: the Encinitas Housing Authority (the EHA), the Encinitas Public
Financing Authority (the EPFA), and the San Dieguito Water District (SDWD).
The EHA was formed on January 26, 1994, under the laws of the State of California to provide
housing assistance to citizens of the City.
The EPFA was formed on November 6, 1991, by the City and SDWD as a Joint Powers Authority
under the laws of the State of California to purchase, finance, and lease certain real property to the
members. The member agencies are the City and the SDWD.
SDWD was formed in 1922 under the laws of the State of California to supply water services to the
central western portion of San Diego County. Certain management, maintenance, and operating
functions are the responsibility of the City, which bills periodically for these services.
The criteria used in determining the scope of the reporting entity are based on the provisions of
Governmental Accounting Standards Board (GASB) Statement No 14, The Financial Reporting Entity, as
amended by GASB Statement No. 61, The Financial Reporting Entity - Omnibus –An Amendment of GASB
Statements No. 14 and No. 34. The City is the primary governmental unit. Component units are financially
accountable to the City. Financial accountability exists if the primary government appoints a voting majority
of the entity's governing body and (1) it is able to impose its will on that organization or (2) there is potential
for the organization to provide financial benefit, or impose financial burdens on the primary government. The
component units have been accounted for as "blended" component units of the City. Despite being legally
separate, these entities are so intertwined with the City that they are, in substance, part of the City's
operations. Accordingly, the balances and transactions of these component units are reported within the
funds of the City. SDWD is reported as an enterprise fund of the City.
The following specific criteria were used in determining the status of these component units:
Members of the City Council also act as the governing body of the EHA, the EPFA, and SDWD.
The City, the EHA, the EPFA, and SDWD are financially interdependent.
The EHA, the EPFA, and SDWD are managed, at least in part, by employees of the City, who
provide various support functions including financial reporting and investment decisions.
Separate financial statements for SDWD are available at the City's administrative office. Separate financial
statements are not required or prepared for the EHA and the EPFA.
City of Encinitas
Notes to the Schedule of Expenditures of Federal Awards (Continued)
For the Year Ended June 30, 2017
9
Note 2 – Summary of Significant Accounting Policies
Basis of Accounting
The activity of the City’s federal award programs are recorded within the special revenue funds of the City.
The City utilizes the modified accrual basis of accounting for the special revenue funds as described in Note
(1) to the City’s basic financial statements. Accordingly, the accompanying Schedule of Expenditures of
Federal Awards is presented using the modified accrual basis of accounting.
Schedule of Expenditures of Federal Awards
The accompanying Schedule of Expenditures of Federal Awards presents the activity of all federal awards
programs of the City of Encinitas, California (City) and, therefore, does not present the financial position or
results of operations of the City. The City’s reporting entity is defined in Note (1) to the City’s basic financial
statements.
Catalog of Federal Domestic Assistance (CFDA) Numbers
The CFDA numbers included in the accompanying SEFA were determined on the program name, review of
grant contract information, and the Office of Management and Budget’s Catalog of Federal Domestic
Assistance.
Note 3 – Indirect Cost Rate
The City did not elect to use the 10-percent de minimis rate as allowed under the Uniform Guidance.
City of Encinitas
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2017
10
Section I – Summary of Auditor’s Results
Financial Statements
Type of report the auditors issued on whether the financial
statements audited were prepared in accordance with GAAP: Unmodified
Internal control over financial reporting:
Material weakness(es) identified? No
Significant deficiency(ies) identified? None Reported
Noncompliance material to financial statements noted? No
Federal Awards
Internal control over major programs:
Material weakness(es) identified? No
Significant deficiency(ies) identified? None Reported
Type of auditor’s report issued on compliance for major programs Unmodified
Any audit findings disclosed that are required to be reported in
accordance with 2 CFR 200.516(a)? No
Identification of major programs:
CFDA Number(s) Name of Federal Program or Cluster Expenditures
14.871 Housingn Voucher Cluster 1,243,047$
Total Expenditures of All Major Federal Programs 1,243,047$
Total Expenditures of Federal Awards 2,542,793$
Percentage of Total Expenditures of Federal Awards 48.89%
Dollar threshold used to distinguish between type A and type B program $750,000
Auditee qualified as low-risk auditee in accordance with 2 CFR 200.520? Yes
City of Encinitas
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2017
11
Section II – Financial Statement Findings
A. Current Year Findings – Financial Statement Audit
No findings were noted on the City’s financial statement audit for the year ended June 30, 2017.
B. Prior Year Findings – Financial Statement Audit
No findings were noted on the City’s financial statement audit for the year ended June 30, 2016.
Section III – Federal Award Findings
A. Current Year Findings and Questioned Costs – Major Federal Award Program Audit
No findings or questioned costs were noted on the City’s major programs for the year ended
June 30, 2017.
B. Prior Year Findings and Questioned Costs – Major Federal Award Program Audit
No findings or questioned costs were noted on the City’s major programs for the year ended
June 30, 2016.
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