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CM2016-090 INDEPENDENT ACCOUNTANTS' REPORT CM2016-090 C/Ua1& qe4 C Chino Hills MEMORANDUM DATE: December 5, 2016 TO: Honorable Mayor and City Cou cil FROM: Konradt Bartlam, City Mana•eri w RE: INDEPENDENT ACCOUNTANT ' REPORTS ON APPLYING AGREED- UPON PROCEDURES AND INVESTMENT POLICY — SEMI-ANNUAL AUDITS The City's independent auditors, Lance, Soil & Lunghard, recently completed their semi- annual audits of Applying Agreed-Upon Procedures and of the City's investments and investment policy for the six months ended December 31, 2015, and June 30, 2016. The semi-annual audits are being conducted in response to the level of accountability for investing public funds that were imposed on the City Council and City staff as a result of legislation adopted in 1995. The auditor's scope of work and findings are described in the attached letters to the City Council from the auditors. If you have any questions, please contact Judy Lancaster at extension 2642 or me. Thank you. KB:JRL:ssr s •.n• •o _ . INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES To the Honorable Mayor and Members of the City Council City of Chino Hills, California We have performed the procedures enumerated below, which were agreed to by the City Council and the management of the City of Chino Hills, California (the City), solely to assist the City in evaluating the Treasurer's Report for the month ended December 31, 2015, for compliance with the provisions of the California Government Code and with the City's Investment Policy dated June 23, 2015. The management of the City is responsible for the Treasurer's Report for the month ended December 31, 2015. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below, either for the purpose for which this report has been requested or for any other purpose. Scope of the Procedures Performed and Related Findings The procedures performed and the results obtained from the performance thereof were as follows: 1. We obtained a copy of the City Treasurer's Report for December 31, 2015, and reconciled individual investments/deposits to supporting documentation obtained from the City's staff. Also,we traced total funds reported on the Treasurer's Report to the City's General Ledger at December 31, 2015. Results: No exceptions were noted as a result of our procedures. 2. We compared the investments listed on the City Treasurer's Report for the month of December 31, 2015, to the type of investments authorized by the City's Investment Policy and Government Code Section 53601. Results: Based on our procedures, investments held by the City at December 31, 2015, appeared to comply with the City's Investment Policy and Government Code Section 53601. 3. We compared the market value of the investments listed on the Treasurer's Report for the month of December 31, 2015, to the City's copies of investment statements. Results: Based on our procedures performed, the December 31, 2015 Treasurer's Report did not report certain investments at their fair market value. Investments held with the State of California Local Agency Investment Fund (LAIF) and Chandler Asset Management were reported at their cost value which was less than their fair market value. This is normal practice and it has been noted that the fair market value is reported in accordance with Government Auditing Standards at June 30th each year. We will continue to review the practice on the June investment review. PrimeGiobal 203 N.Brea Blvd.,Suite 203 [ Brea,CA 92821 I Phone:714.672.0022 Su::: CPA., MTh Abv190R9 To the Honorable Mayor and Members of the City Council City of Chino Hills, California 4. We read the City Treasurer's Report for the month of December 31, 2016, to ascertain that it contained all the information/data required by Government Code Section 53646 and met the timing requirements of Government Code Section 53646 as follows: a. Was submitted within 30 days following the end of the quarter. b. Included.the type of investment, issuer, date,of maturity, par and dollar amount invested on all securities, investments and monies held by the City. a. Included those funds under management of contracted parties (fiscal agents, trustee, deferred compensation, plan administrators, etc.). d. Included market value(and source) as of the date of the report for all securities held by the City or under management of any outside party that was not also a local agency or the LAIF. e. Stated compliance of the portfolio to the Investment Policy of the City. f. Included a statement addressing the ability of the City to meet the pool's expenditure requirements for the next six months. g, Included the most recent statements from LAIF and the Los Angeles County Investment Pools, in lieu of the information required by(b) and (d)above, for City investments that have been placed in those pools. Results: No exceptions were noted as a result of our procedures. 5. We compared the investments listed in the City Treasurer's Report for the month of December 31, 2015, to the prohibited investments listed In the City's Investment Policy and Government Code Section 53601.6. Results: Based on our procedures,the City did not appear to hold any prohibited securities. • 6. We calculated the totals (cost basis)for the investments listed in the City Treasurer's Report for the month of December 31, 2015, and compared those totals to the limitations imposed by the City's Investment Policy and Government Code Section 53601 for specified Investment types. Results: Based on our procedures, investments listed on the City Treasurer's Report appeared to be within the limit of the City's Investment Policy and within Government Code Section 53601. 7. We agreed individual Investment maturity dates listed on the City Treasurer's Report for the month of December 31, 2015,to the City's copies of the investment statements, to determine if they conformed to the maturity requirements of the City's Investment Policy and Government Code Section 53601. Results: Based on our test work, investments listed on the City Treasurer's Report appeared to conform to the City's Investment Policy and Government Code Section 53601, 8, We were asked to obtain and read any third-party agreements and broker/dealer agreements in effect at December 31, 2015, to determine if the agreement contained a clause addressing delivery of securities and that the delivery method conformed to Government Code Section 53601, Results: Based on our procedures, the City has conformed to the Government Code Section 53601 addressing the delivery and the method of delivery for the securities. LSL°:: qr.b.A/JCL t.00.0115 To the Honorable Mayor and Membersof the City Council City of Chino Hills, California 9. We were asked to re-compute and review supporting documentation relevant to any repurchase agreements and any reverse repurchase agreements held by the City at December 31, 2015, to ascertain if these Investments conformed to the requirement of Government Code Section 53601(i) and 53635(i). Results: Based on our procedures, the City did not appear to hold any repurchase agreements or any reverse repurchase agreements at December 31, 2015. We were not engaged to, and did not conduct an examination; the objective of which would be the expression of an opinion on the Treasurer's Report dated December 31, 2015. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the Information and use of the City Council and management of the City and is not intended to be,and should not be used by anyone other than these specified parties. eresoc, sok Sr-44.4,/, Brea, California November 22,2016