LTC 329-2018 External Auditors (Crowe Horwath LLP) Annual AuditMIAMI BEACH
OFFICE OF THE CITY MANAGFR
LTC # 329-2018
LETTER TO COMMISSION
TO: Mayor Dan Gelber and Members of the City Commission
FROM: Jimmy L. Morales, City Manager
DATE: June 11, 2018
SUBJECT External Auditor's (Crowe Horwath LLP) Annual Audit Report on the City of Miami
Beach (the City) for the period ended September 30, 2017
Enclosed, for your information, is the external auditor's report dated March 30, 2018 (received on May
22, 2018) for the fiscal year ended September 30, 2017. This package includes the following:
A. A letter to the Mayor and Members of the City Commission, discussing the auditor's required
communications to the Mayor and City Commission, auditor's responsibility under auditing
standards general accepted in the United States of America and under Government Auditing
Standards, planned scope and timing of the audit, significant accounting policies and
management judgments and accounting estimates, auditor's judgments about qualitative
aspects of significant accounting practices, corrected and uncorrected misstatements, and
other communications.
B. The City of Miami Beach Audit Report for the fiscal year ended September 30, 2017. This
report includes:
• Comprehensive Annual Financial Report (CAFR) for the fiscal year ended September 30,
2017, which includes an unmodified (clean) audit opinion and emphasis on the
implementation of Governmental Accounting Standards Board (GASB) Statement No. 74,
Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans on
pages 9 through 11,
• Single Audit Reports in accordance with Uniform Guidance and Chapter 10.550 Rules of
the Auditor General, which includes a clean opinion on each major federal program and
state financial assistance project on pages 3 and 4. There were no financial statement
findings for fiscal year 2017 and all of fiscal year 2016 findings were resolved as
documented on page 13,
• Other Reports — Independent Accountant's Report on compliance with section 218.415,
Florida Statutes and Management Letter, reporting the City's compliance with all state
statutes and rules of the Auditor General of the State of Florida, and
• Continuing Disclosures for the City of Miami Beach and the Miami Beach Redevelopment
Agency in accordance with U.S. Security and Exchange Commission Rule 15c2-12.
Electronic versions of the above reports are available at the following web address link:
https://www.miamibeachfl.gov/city-hall/finance/financial-documents/. The above reports will be
presented and discussed by the external auditors at an upcoming Audit Committee meeting.
If you have any questions or need additional information, please feel free to contact Allison R.
Williams at 305-673-7466.
JLM/JW/avihvi
Crowe Horwath.
Crowe Horwath LLP
Independent Member Crowe Horwath International
To the Honorable Mayor and Member of the City Commission
City of Miami Beach, Florida
Professional standards require that we communicate certain matters to keep you adequately informed
about matters related to the financial statement audit that are, in our professional judgment, significant and
relevant to your responsibilities in overseeing the financial reporting process. We communicate such
matters in this report.
AUDITOR'S RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE
UNITED STATES OF AMERICA
Our responsibility is to form and express an opinion about whether the financial statements that have been
prepared by management with your oversight are presented fairly, in all material respects, in conformity
with accounting principles generally accepted in the United States of America. The audit of the financial
statements does not relieve you of your responsibilities and does not relieve management of their
responsibilities. Refer to our engagement letter with the City for further information on the responsibilities
of management and of Crowe Horwath LLP.
AUDITOR'S RESPONSIBILITY UNDER GOVERNMENT AUDITING STANDARDS
As part of obtaining reasonable assurance about whether the City's financial statements are free of material
misstatement, we performed tests of the City's 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 or disclosures. 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.
PLANNED SCOPE AND TIMING OF THE AUDIT
We are to communicate an overview of the planned scope and timing of the audit. Accordingly, the following
matters regarding the planned scope and timing of the audit were discussed with you on December 19,
2017.
• How we proposed to address the significant risks of material misstatement, whether due to
fraud or error.
• Our approach to internal control relevant to the audit.
• The concept of materiality in planning and executing the audit, focusing on the factors
considered rather than on specific thresholds or amounts.
• Where the entity has an internal audit function, the extent to which the auditor will use the work
of internal audit, and how the external and internal auditors can best work together.
• Your views and knowledge of matters you consider warrant our attention during the audit, as
well as your views on:
o The allocation of responsibilities between you and management.
o The entity's objectives and strategies, and the related business risks that may result in
material misstatements.
o Significant communications with regulators.
o Other matters you believe are relevant to the audit of the financial statements.
• Matters relative to the use of other auditors/other accountants during the audit:
o An overview of the type of work to be performed by other auditors/other accountants.
o The basis for the decision to make reference to the audit of the other auditor in our
report on the entity's financial statements.
o An overview of the nature of our planned involvement in the work to be performed by
the other auditor/other accountant.
SIGNIFICANT ACCOUNTING POLICIES AND MANAGEMENT JUDGMENTS AND ACCOUNTING
ESTIMATES
Significant Accounting Policies: Those Charged with Governance should be informed of the initial selection
of and changes in significant accounting policies or their application. Also, Those Charged with Governance
should be aware of methods used to account for significant unusual transactions and the effect of significant
accounting policies in controversial or emerging areas where there is a lack of authoritative consensus. We
believe management has the primary responsibility to inform Those Charged with Governance about such
matters. To assist Those Charged with Governance in its oversight role, we also provide the following.
Accounting Standard
GASB Statement No. 82, Pension Issues—An
Amendment of GASB Statements No. 67, No.
68, and No. 73. This Statement addresses
certain issues that have been raised with respect
to Statement No. 67, Financial Reporting for
Pension Plans, No. 68, Accounting and Financial
Reporting for Pensions, and No. 73, Accounting
and Financial Reporting for Pensions and
Related Assets That Are Not within the Scope of
GASB Statement 68, and Amendments to
Certain Provisions of GASB Statements 67 and
68.
GASB Statement No. 80, Blending
Requirements for Certain Component Units –
An Amendment of GASB Statement No. 14.
This Statement clarifies that certain component
units incorporated as not-for-profit corporations
should be blended in the financial statements of
the primary state or local government in a
manner similar to a department or activity of the
primary government. The Statement addresses
diversity in practice regarding the presentation of
not-for-profit corporations in which the primary
government is the sole corporate member.
Impact of Adoption
Adoption of this Statement did not have a
material impact on the City's financial position or
results of operations.
Adoption of this Statement did not have a
material impact on the City's financial position or
results of operations.
Accounting Standard
GASB Statement No. 79, Certain External
Investment Pools and Pool Participants. This
Statement will enhance comparability of financial
statements among governments by establishing
specific criteria used to determine whether a
qualifying external investment pool may elect to
use an amortized cost exception to fair value
measurement.
GASB Statement No. 78, Pensions Provided
through Certain Multiple-Employer Defined
Benefit Pension Plans. This Statement
amends the scope and applicability of Statement
No. 68 to exclude pensions provided to
employees of state or local governmental
employers through a cost-sharing multiple-
employer defined benefit pension plan that (1) is
not a state or local governmental pension plan,
(2) is used to provide defined benefit pensions
both to employees of state or local governmental
employers and to employees of employers that
are not state or local governmental employers,
and (3) has no predominant state or local
governmental employer (either individually or
collectively with other state or local governmental
employers that provide pensions through the
pension plan).
GASB Statement No. 77, Tax Abatement
Disclosures. This Statement requires
governments that enter into tax abatement
agreements to disclose information about its own
tax abatement agreements and those entered
into by other governments that reduce the
reporting government's tax revenue.
GASB Statement No. 74, Financial Reporting
for Postemployment Benefit Plans other than
Pension Plans. The objective of this Statement
is to improve the usefulness of information about
postemployment benefits other than pensions
(other postemployment benefits or OPEB)
included in general purpose external financial
reports of state and local governmental other
postemployment benefit plans for making
decisions assessing accountability.
Significant Unusual Transactions.
Significant Accounting Policies in
Controversial or Emerging Areas.
Impact of Adoption
Adoption of this Statement did not have a
material impact on the City's financial position or
results of operations.
Adoption of this Statement did not have a
material impact on the City's financial position or
results of operations.
Upon adoption of this Statement, additional
disclosures were added to the financial
statements. However, Adoption of this Statement
did not have a material impact on the City's
financial position or results of operations.
Upon adoption of this Statement, the City
additional disclosures and required
supplementary information were added to the
financial statements.
No such matters noted
No such matters noted
Management Judgments and Accounting Estimates: Further, accounting estimates are an integral part of
the financial statements prepared by management and are based upon management's current judgments.
These judgments are based upon knowledge and experience about past and current events and
assumptions about future events. Certain estimates are particularly sensitive because of their significance
and because of the possibility that future events affecting them may differ markedly from management's
current judgments and may be subject to significant change in the near term.
The following describes the significant accounting estimates reflected in the City's year-end financial
statements, the process used by management in formulating these particularly sensitive accounting
estimates and the primary basis for our conclusions regarding the reasonableness of those estimates.
Significant Accounting
Estimate
Allowance for Uncollectible
Accounts and Loans
Fair Values of Investment
Securities and Other
Financial Instruments
Useful Lives of Capital
Assets
Compensated Absences
Liabilities
Self-insurance Liabilities
Landfill Postclosure Care
Costs
Loss Contingencies
Process Used by Management Basis for Our Conclusions
The allowances were determined by
management by a process involving
consideration of past experiences,
current aging information, contacts
with the customers and borrowers,
and other available data including
environmental factors such as
industry, geographical, economic
and political factors.
The disclosure of fair values of
securities and other financial
instruments requires management
to use certain assumptions and
estimates pertaining to the fair
values of its financial assets and
financial liabilities.
Management has determined the
economic useful lives of fixed
assets based on past history of
similar types of assets, future plans
as to their use, and other factors
that impact their economic value to
the City.
Management has determined the
estimated amounts for
compensated absences based on
future payments that are reasonably
estimable.
The actuarial estimates are
developed based upon information
supplied to the actuaries by
management about past events as
well as expectations about future
events.
The estimates are developed based
upon information supplied to the
engineer's by management about
past events as well as expectations
about future events.
The City consults with legal counsel
to evaluate outstanding litigation,
claims and assessments. Factors
that affect management's
evaluation of litigation contingencies
requiring disclosure include the
nature of the contingencies and
We tested this accounting
estimate by reviewing, on a test
basis, the information listed.
We tested the propriety of
information underlying
management's estimates.
We tested the propriety of
information underlying
management's estimates.
We tested these estimates by
reviewing management's
schedule and testing certain
other information underlying
management's analysis.
We reviewed the
reasonableness of these
estimates and assumptions.
We reviewed the
reasonableness of these
estimates and assumptions.
Based on information obtained
from the City's legal counsel
regarding this matter and
discussions with management,
we concur with management's
determination that the loss
contingency does not meet
Significant Accounting
Estimate
Pension and
Postretirement Obligations
Process Used by Management
whether the outcome could have an
effect on the consolidated financial
statements.
Amounts reported for pension and
postretirement obligations require
management to use estimates that
may be subject to significant
change in the near term. These
estimates are based on projection
of the weighted average discount
rate, rate of increase in future
compensation levels, and weighted
average expected long-term rate of
return on pension assets.
Basis for Our Conclusions
conditions for accrual of being
both probable and estimable,
and, thus, no accrual is
recorded and no specific
disclosures are required.
We reviewed the
reasonableness of these
estimates and assumptions.
AUDITOR'S JUDGMENTS ABOUT QUALITATIVE ASPECTS OF SIGNIFICANT ACCOUNTING
PRACTICES
We are to discuss with you our comments about the following matters related to the City's accounting
policies and financial statement disclosures. Accordingly, these matters will be discussed during our
meeting with you.
• The accounting policies to the particular circumstances of the City, considering the need to balance
the cost of providing information with the likely benefit to users of the City's financial statements
are appropriate.
• Overall, the disclosures in the financial statements are neutral, consistent, and clear.
• The effect of the timing of transactions in relation to the period in which they are recorded is
appropriate.
• There were no significant risks and exposures, and uncertainties that are disclosed in the financial
statements.
• There were no unusual transactions including nonrecurring amounts recognized during the audit
period that materially impacted the financial statements.
• There were no particularly sensitive financial statement disclosures.
• There were no factors affecting asset and liability carrying values, including the City's basis for
determining useful lives assigned to tangible and intangible assets.
• There were no selective correction of misstatements, for example, correcting misstatements
with the effect of increasing reported earnings, but not those that have the effect of decreasing
reported earnings.
CORRECTED AND UNCORRECTED MISSTATEMENTS
Corrected Misstatements: We are to inform you of material corrected misstatements that were brought to
the attention of management as a result of our audit procedures.
There were no such misstatements.
Uncorrected Misstatements: We are to inform you of uncorrected misstatements that were aggregated by
us during the current engagement and pertaining to the latest and prior period(s) presented that were
determined by management to be immaterial, both individually and in the aggregate, to the financial
statements taken as a whole. For your consideration, we have distinguished misstatements between
known misstatements and likely misstatements.
There were no such misstatements.
OTHER COMMUNICATIONS
Communication Item
Other Information In Documents Containing
Audited Financial Statements
Information may be prepared by management
that accompanies the financial statements. To
assist your consideration of this information, you
should know that we are required by audit
standards to read such information and consider
whether such information, or the manner of its
presentation, is materially inconsistent with
information in the financial statements. If we
consider the information materially inconsistent
based on this reading, we are to seek a
resolution of the matter.
Significant Difficulties Encountered During
the Audit
We are to inform you of any significant difficulties
encountered in dealing with management related
to the performance of the audit.
Disagreements With Management
We are to discuss with you any disagreements
with management, whether or not satisfactorily
resolved, about matters that individually or in the
aggregate could be significant to the City's
financial statements or the auditor's report.
Consultations With Other Accountants
If management consulted with other accountants
about auditing and accounting matters, we are to
inform you of such consultation, if we are aware
of it, and provide our views on the significant
matters that were the subject of such
consultation.
Representations The Auditor Is Requesting
From Management
We are to provide you with a copy of
management's requested written representations
to us.
Significant Issues Discussed, or Subject to
Correspondence, With Management
We are to communicate to you any significant
issues that were discussed or were the subject of
correspondence with management.
Significant Related Party Findings and Issues
We are to communicate to you significant
findings and issues arising during the audit in
connection with the City's related parties.
Results
We read the following items and noted no
material inconsistencies or misstatement of facts
in such information based on our reading thereof.
• Introductory section
• Statistical section
There were no significant difficulties encountered
in dealing with management related to the
performance of the audit.
During our audit, there were no such
disagreements with management.
We are not aware of any instances where
management consulted with other accountants
about auditing or accounting matters since no
other accountants contacted us, which they are
required to do by Statement on Auditing
Standards No. 50, before they provide written or
oral advice.
We direct your attention to a copy of the letter of
management's representation to us provided
separately.
There were no such significant issues discussed,
or subject to correspondence, with management.
There were no such findings or issues that are,
in our judgment, significant and relevant to you
regarding your oversight of the financial reporting
process.
Communication Item
Other Findings or Issues We Find Relevant or
Significant
We are to communicate to you other findings or
issues, if any, arising from the audit that are, in
our professional judgment, significant and
relevant to you regarding your oversight of the
financial reporting process.
Results
There were no such other findings or issues that
are, in our judgment, significant and relevant to
you regarding your oversight of the financial
reporting process.
We are pleased to serve the City as its independent auditors and look forward to our continued relationship.
We provide the above information to assist you in performing your oversight responsibilities, and would be
pleased to discuss this letter or any matters further, should you desire. This letter is intended solely for the
information and use of the Honorable Mayor, City Commission, Audit Advisory Board and, if appropriate,
management, and is not intended to be and should not be used by anyone other than these specified
parties.
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Crowe Horwath LLP
Miami, Florida
March 30, 2018