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November 23, 2022

  • Nephi City receives a clean opinion during audit process

By Myrna Trauntvein
TN Correspondent

Nephi City’s audit report for the year ended June 2022 was given more than a “clean audit” rating because there were no findings.

An audit finding means a written explanation of errors, noncompliance with legal requirements, use of funds for improper purposes, weakness, deficiencies, adverse conditions, or the need for improvement or changes.

“The auditor’s report is now placed first,” said John Haderly, CPA with Larson and Company, Spanish Fork, who performed the independent audit.

Haderly, who was in St. George teaching a class for the Utah Association of Counties (UAC) presented the audit via Zoom to the city council.

In the audit letter, which he reviewed with the council, he said that Nephi City’s management is responsible for the preparation and fair presentation of the financial statements. The auditor’s responsibility is to obtain reasonable assurance about whether the financial statements, as a whole are free from material misstatement, whether due to fraud or error and to issue an auditor’s report that includes their opinions.

“The summary of the audit results are: The independent auditor’s report expresses an unqualified opinion on the basic financial statements of Nephi City (known as a clean report), no reportable condition related to the audit of the financial statements are reported in the Auditor’s Report on Internal Controls and Compliance with Laws and Regulations.”

“No instances of noncompliance material to the financial statements of Nephi City were disclosed during the audit,” Haderly said. “No material weaknesses relating to the audit of the major federal award program is reported in the Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with Uniform Guidance.”

“The independent auditor’s report on compliance for the major federal award programs for Nephi City, expresses an unqualified opinion,” he said. “The audit disclosed no audit findings that are required to be reported under 2 CFR section 200.526(a).”

The management letter, he said, was prepared for the readers of the city and was designed to provide an overview of the city’s financial activity and to assist the reader in focusing on significant financial issues.

“The total net position of the city increased by $6,192,265 to $50,990,246. The governmental net position increased by $812,676 and the business-type net position increased by $5,376,589,” according to the management discussion and analysis.

The total net position of $50,990,246 is made up of $30,810,621 net investment in capital assets and $20,176,625 in other net assets.

The general fund, which is the primary operating fund, had a decrease in its fund balance of $229,302 and thus went to a total of $1,583,044.

Both of the government-wide financial statements distinguish functions of Nephi City that are principally supported by taxes and intergovernmental revenues from other functions that are intended to recover all or a significant portion of their costs through user fees and charges which are business-type activities.

In the case of Nephi, assets exceed liabilities by $50,990,246.

The largest portion, $30,810,621, of Nephi City’s net position reflects its investment in capital assets such as land, building, infrastructure assets and machinery and equipment less any related debt used to acquire those assets that are still outstanding.

The unemployment rate for Juab County was 1.8 percent compared with a state unemployment rate of 2.1 percent and a national rate of 3.5 percents.

The General Fund budget for fiscal year ending June 30, 2021 reflects an increase of 16 percent over the final budget for the fiscal year ended June 30, 2021.

“I make sure that me and my staff are independent of any of the city staff or elected officials,” Haderly said. “As auditors, we get an annual peer review.”

He said that though it wasn’t required, he still liked cities to adhere to the “three-day rule” meaning that every municipal official handling public funds deposit those funds as soon as practical but no later than three working days after the receipt of those funds.

Nephi had been abiding by that rule.

“We have audited Nephi City’s compliance with the applicable general state compliance requirements described in the ‘State Compliance Audit Guide,’ issued by the Office of the Utah State Auditor that could have a direct and material effect on Nephi City for the year ended June 30, 2022.”

The records were tested for budgetary compliance, justice courts, fraud risk assessment, fund balance, restricted taxes and related revenues and government frees.

“The programs tested as major programs include: Airport Project 21.106,” Haderly said. “The threshold for distinguishing Types A and B programs is $750,000 of federal awards expended and Nephi was determined to be a low-risk audit.”

In addition, he said, there were no findings noted during the prior audit.

Lisa Brough, city recorder/finance officer, and Seth Atkinson, city administrator, both had to have the ability to utilize journal entries.

Journal entries are the records that are used to record transactions, classifications, adjustments and corrections in the general ledger, and include the standard journal entries and non-standard journal entries used to record unusual transactions or non-recurring adjustments

Evidence on journal entries is a mandatory procedure to mitigate the risk of fraud, and it is required to evaluate the design and implementation of relevant controls.

“As auditors, we must select these made at the end of the report preparation period and it is required to consider the evidence (not necessarily testing) of them during the period,” Haderly said.

He thanked Brough, Atkinson and the city staff for the smooth audit process.