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HomeMy WebLinkAbout11 Attachment 1 Truckee Donner PUD 2021 Audit TCWG LetterX COMMUNICATIONS WITH THOSE CHARGED WITH GOVERNANCE AND INTERNAL CONTROL RELATED MATTERS TRUCKEE DONNER PUBLIS UTILITY DISTRICT December 31, 2021 DMOSSADAMS (IILI) MOSSADAMS Communications with Those Charged with Governance To the Board of Directors Truckee Donner Public Utility District We have audited the consolidated financial statements of Truckee Donner Public Utility District (the District) as of and for the year ended December 31, 2021, and have issued our reports thereon dated May 10, 2022. Professional standards require that we provide you with the following information related to our audit. Our Responsibility under Auditing Standards Generally Accepted in the United States of America As stated in our engagement letter dated November 9, 2021, we are responsible for forming and expressing an opinion about whether the consolidated financial statements that have been prepared by management, with your oversight, are prepared, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the consolidated financial statements does not relieve you or management of your responsibilities. We conducted our audit in accordance with auditing standards generally accepted in the United States of America (U.S. GAAS) As part of an audit conducted in accordance with U.S. GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. 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 District's internal control over financial reporting. Accordingly, we considered the District's internal control solely for the purposes of determining our audit procedures and not to provide assurance concerning such internal control. We are also responsible for communicating significant matters related to the consolidated financial statement audit that, in our professional judgment, are 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. The supplementary information was subject to certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves. Other Information Included in the Annual Report Management is responsible for the other information included in the annual report. The other information comprises the statistical selection but does not include the consolidated financial statements and our auditor's report thereon. Our opinion on the consolidated financial statements does not cover the other information, and we do not express an opinion or any form of assurance thereon. Our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the audited consolidated financial statements. We have read the information, and nothing came to our attention that caused us to believe that such information is materially inconsistent with the consolidated financial statements. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our engagement letter dated November 9, 2021. Significant Audit Findings and Issues Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the District are described in Note 1 to the consolidated financial statements. No new accounting policies were adopted and there were no changes in the application of existing policies during 2021. We noted no transactions entered into by the District during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the consolidated financial statements in a different period than when the transaction occurred. Significant Accounting Estimates Accounting estimates are an integral part of the consolidated financial statements prepared by management and are based on management's 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 consolidated financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the consolidated financial statements were: Unbilled revenue — Unbilled revenue is a measure of revenue earned through the end of the reporting period that has yet to be billed. This generally represents accounts with billing cycles that start in the reporting year and end in the subsequent year. We have evaluated the key factors and assumptions used to develop unbilled revenue in determining that it is reasonable in relation to the consolidated financial statements taken as a whole. Allowance for doubtful accounts — The allowance for doubtful accounts represents an estimate of the amount of accounts receivable that will not be collected. We have evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the consolidated financial statements taken as a whole. 2 Recovery periods for the cost of plant — This represents the depreciation of plant assets. Management's estimate of the recovery periods for the cost of plant is based on regulatory - prescribed depreciation recovery periods. We have evaluated the key factors and assumptions used to develop the recovery periods in determining that they are reasonable in relation to the consolidated financial statements taken as a whole. Other Post -Employment Benefit Obligations — This represents the amount of annual expenses recognized for post -employment benefits. The amount is actuarially determined with management input. We have evaluated the key factors and assumptions used to develop the annual expenses in determining that it is reasonable in relation to the consolidated financial statements taken as a whole. Pension Liability and Related Pension Expense — This represents the amount of annual expense recognized for pensions and the related pension asset or liability. The amount is actuarially determined, with CalPERS management input. We have evaluated the key factors and assumptions used to develop the annual expense in determining that it is reasonable in relation to the consolidated financial statements taken as a whole. Valuation of investments — This represents management's estimate of the fair value of investments based on current market rates and conditions. We evaluated the key factors and assumptions used to develop the valuation of investments and determined that they are reasonable in relation to the consolidated financial statements taken as a whole. Financial Statement Disclosures The disclosures in the consolidated financial statements are consistent, clear and understandable. Certain financial statement disclosures may be particularly sensitive because of their significance to financial statement users. We did not note any disclosures in the consolidated financial statements which we consider sensitive to potential users. Significant Unusual Transactions We encountered no significant unusual transactions during our audit of the District's consolidated financial statements. Significant Difficulties Encountered in Performing the Audit Professional standards require us to inform you of any significant difficulties encountered in performing the audit. No significant difficulties were encountered during our audit of the District's consolidated financial statements. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the consolidated financial statements or the auditor's report. No such disagreements arose during the course of our audit. 3 Circumstances that Affect the Form and Content of the Auditor's Report There may be circumstances in which we would consider it necessary to include additional information in the auditor's report in accordance with auditing standards generally accepted in the United States of America. There were no circumstances that affected the form and content of the auditor's report. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all factual and judgmental misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Corrected Misstatements: There were no corrected factual or judgmental misstatements identified during the audit. Uncorrected Misstatements: We identified one passed audit adjustment during the course of our audit procedures. The uncorrected misstatement entry was to accrue for additional payroll taxes incurred during the year ended December 31, 2021 and paid subsequent to year-end of $90,828. Management Representations We have requested certain representations from management that are included in the management representation letter dated May 10, 2022. Management Consultation with Other Independent 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 District's consolidated 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. To our knowledge, there were no such consultations with other accountants. Other Significant Audit Findings or Issues We are required to communicate to you other findings or issues arising from the audit that are, in our professional judgment, significant and relevant to your oversight of the financial reporting process. There were no such items identified. 0 Communication of Internal Control Related Matters In planning and performing our audit of the consolidated financial statements of the District as of and for the year ended December 31, 2020 in accordance with auditing standards generally accepted in the United States of America, we considered the District's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District'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 consolidated financial statements will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses. 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. Other Control Related Matters During the course of our audit, we became aware of matters that are opportunities for improving reporting in compliance with generally accepted accounting principles, and strengthening internal controls and operating effectiveness, which are summarized below: Review of Existing Vendors During our control testing over vendors, we noted no formal review is performed over key changes made to existing vendors in the vendor master file, including changes in payment and routing information. We recommend that the District implement controls to require review of key changes to existing vendors in the vendor master file prior to issuance of payment. User Access Review Through our review of the IT systems and related controls, we noted that a formal review of user access is performed, however, the review is not being formally documented. As a best practice, we recommend that a periodic review of user access take place at least annually, and that such review be documented to note, at a minimum, when the review was performed, which reports were reviewed, who was involved in the review, and what conclusions were reached. Review of SOC 1 Reports Through our review of the IT systems and related controls, we noted that a formal review of SOC 1 reports for key systems is not being performed. As a best practice, we recommend that an annual review of SOC 1 reports is performed, and that such review be documented to note, at a minimum, when the review was performed, who was involved in the review, and what conclusions were reached. 5 This information is intended solely for the use of the Board of Directors and management of the District and is not intended to be and should not be used by anyone other than these specified parties. 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