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3.0.b. SWCSR 08-15-2019 CliftonLarsonAllen LLP CLAconnect.com Board of Directors and Management Sherburne Wright County Cable Communications Commission Buffalo, Minnesota In planning and performing our audit of the financial statements of Sherburne Wright County Cable Communications Commission (the Commission) as of and for the year ended December 31, 2017, in accordance with auditing standards generally accepted in the United States of America, we considered the Commission'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 opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Commission's internal control. Accordingly, we do not express an opinion on the effectiveness of the Commission's internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. In addition, because of inherent limitations in internal control, including the possibility of management override of controls, misstatements due to fraud or error may occur and not be detected by such controls. However, as discussed below, we identified certain deficiencies in internal control that we consider to be material weaknesses. 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 Commission's financial statements will not be prevented, or detected and corrected, on a timely basis. Material weaknesses We consider the following deficiencies in the Commission's internal control to be material weaknesses. • CliftonLarsonAllen prepared the financial statements. Management is responsible for establishing and maintaining internal controls including monitoring, and for the fair presentation of the financial statements. The lack of ability and processes to prepare and review the financial statements could affect the ability to report the Commission's financial data consistently with the assertions of management in the financial statements. • There is limited segregation of duties. Generally, a system of internal control contemplates separation of duties so that no one individual should have responsibility to execute a transaction, have physical access to the related assets, and have responsibility or authority to record the transaction. The design of the internal controls over financial reporting could affect the ability of the Township to record, process, summarize, and report financial data consistently with the assertions of management in the financial statements. While we recognize that the Commission may not be large enough to allow for adequate segregation of duties, it is important that the Commission be aware of this condition. @A member of Nexia International Board of Directors and Management Sherburne Wright County Cable Communications Commission Page 2 This communication is intended solely for the information and use of management, the board of directors, and others within the Commission, and is not intended to be, and should not be, used by anyone other than these specified parties. dV/7G/a-i-a.0-7G, ,-pc_.L. CliftonLarsonAllen LLP Buffalo, Minnesota May 15, 2019 CliftonLarsonAllen LLP CLAconnect.com Board of Directors Sherburne Wright County Cable Communications Commission Buffalo, Minnesota We have audited the financial statements of Sherburne Wright County Cable Communications Commission (the Commission) as of and for the year ended December 31, 2017, and have issued our report thereon dated May 15, 2019. We have previously communicated to you information about our responsibilities under auditing standards generally accepted in the United States of America, as well as certain information related to the planned scope and timing of our audit. Professional standards also require that we communicate to you the following information related to our audit. Significant audit findings Qualitative aspects of accounting practices Accounting policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Commission are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2017. We noted no transactions entered into by the Commission during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates Accounting estimates are an integral part of the 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 financial statements and because of the possibility that future events affecting them may differ significantly from those expected. There were no accounting estimates affecting the financial statements which were particularly sensitive or required substantial judgments by management. Financial statement disclosures Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. There were no particularly sensitive financial statement disclosures. The financial statement disclosures are neutral, consistent, and clear. Difficulties encountered in performing the audit In the completion of our audit, we encountered difficulties in receiving necessary information in a timely manner to complete the audit. We received the signed engagement letter in October of 2018, which allowed us to begin auditing procedures. We remained in contact with individuals in the Commission, and were waiting on items to complete the audit into April 2019. At the completion of the audit, we had received all necessary documentation to support our audit opinion. 0 A member of Nexia International Board of Directors Sherburne Wright County Cable Communications Commission Page 2 Uncorrected misstatements Professional standards require us to accumulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management did not identify and we did not notify them of any uncorrected financial statement misstatements. Corrected misstatements Management did not identify and we did not notify them of any financial statement misstatements detected as a result of audit procedures. Disagreements with management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors' report. No such disagreements arose during our audit. Management representations We have requested certain representations from management that are included in the management representation letter dated May 15, 2019. Management consultations 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 Commission's financial statements or a determination of the type of auditors' 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. Significant issues discussed with management prior to engagement We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to engagement as the Commission's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our engagement. Other information in documents containing audited financial statements The schedule of accounts receivable and schedule of accounts payable accompanying the financial statements, which is the responsibility of management, was prepared for purposes of additional analysis and is not a required part of the financial statements. Such information was not subjected to the auditing procedures applied in the audit of the financial statements, and, accordingly, we did not express an opinion or provide any assurance on it. Our auditors' opinion, the audited financial statements, and the notes to financial statements should only be used in their entirety. Inclusion of the audited financial statements in a document you prepare, such as an annual report, should be done only with our prior approval and review of the document. Board of Directors Sherburne Wright County Cable Communications Commission Page 3 This communication is intended solely for the information and use of the board of directors and management of the Commission and is not intended to be, and should not be, used by anyone other than these specified parties. &I/a 7 C..Zd'ii''''-i' '1• Zo 1-,c-Z Z, CliftonLarsonAllen LLP Buffalo, Minnesota May 15, 2019 SHERBURNE WRIGHT COUNTY CABLE COMMUNICATIONS COMMISSION BUFFALO, MINNESOTA FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED DECEMBER 31, 2017 SHERBURNE WRIGHT COUNTY CABLE COMMUNICATIONS COMMISSION TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2017 INTRODUCTORY SECTION BOARD OF DIRECTORS 1 FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT 2 STATEMENT OF BALANCES ARISING FROM CASH TRANSACTIONS 4 STATEMENT OF CASH RECEIPTS, DISBURSEMENTS, AND CHANGES IN CASH FUND BALANCE 5 NOTES TO FINANCIAL STATEMENTS 6 SUPPLEMENTARY INFORMATION (UNAUDITED) SCHEDULE OF ACCOUNTS RECEIVABLE 10 SCHEDULE OF ACCOUNTS PAYABLE 11 OTHER REQUIRED REPORTS INDEPENDENT AUDITORS' REPORT ON MINNESOTA LEGAL COMPLIANCE 12 SHERBURNE WRIGHT COUNTY CABLE COMMUNICATIONS COMMISSION BOARD OF DIRECTORS DECEMBER 31, 2017 Office Official Member City Board Chair Tina Allard Elk River Vice Chair Gina Wolbeck Big Lake Secretary Rachel Leonard Monticello Treasurer Merton Auger Buffalo Director Lee Ann Yager Maple Lake Director Phil Kern Delano Director Dan Madsen Rockford Director Shane Fineran Watertown Director Terri Boese Dassel Director Annita Smythe Cokato Alternate Director Jennifer Swendson Rockford Alternate Director Andrew Carlson Cokato Alternate Director Paula Bauman Delano (1) CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS' REPORT Board of Directors Sherburne Wright County Cable Communications Commission Buffalo, Minnesota Report on the Financial Statements We have audited the statement of balances arising from cash transactions for the Sherburne Wright County Cable Communications Commission (the Commission) as of December 31, 2017, and the related statement of cash receipts, disbursements, and changes in cash fund balance for the year then ended and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of the accounting practices prescribed or permitted by the Minnesota Office of the State Auditor, which practices differ from accounting principles generally accepted in the United States of America, as described in Note 1, to meet the requirements of the Minnesota Office of the State Auditor. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors'Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Commission's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Commission's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. A member of Nexia (2) Inte,na Joral Board of Directors Sherburne Wright County Cable Communications Commission Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles As described in Note 1 to the financial statements, to meet the financial reporting requirements of the Minnesota Office of the State Auditor, the financial statements are prepared by the Commission in accordance with the financial reporting provisions of the accounting practices prescribed or permitted by the Minnesota Office of the State Auditor, which is a basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between the regulatory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. Adverse Opinion on U.S. Generally Accepted Accounting Principles In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles paragraph, the financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Commission as of December 31, 2017, or changes in financial position, or where applicable, cash flows thereof for the year then ended. Unmodified Opinion on Regulatory Basis of Accounting In our opinion, the financial statements referred to above present fairly, in all material respects, the cash balances of the Commission as of December 31, 2017, and the cash receipts and disbursements for the year then ended, in accordance with the financial reporting provisions of the Minnesota Office of the State Auditor described in Note 1. Other Matters Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Sherburne Wright County Cable Communications Commission's regulatory basis financial statements. The schedule of accounts receivable and schedule of accounts payable are presented for purposes of additional analysis and are not a required part of the regulatory basis financial statements. The schedules have not been subjected to the auditing procedures applied in the audit of the regulatory basis financial statements and, accordingly, we do not express an opinion or provide any assurance on them. CliftonLarsonAllen LLP Buffalo, Minnesota May 15, 2019 (3) SHERBURNE WRIGHT COUNTY CABLE COMMUNICATIONS COMMISSION STATEMENT OF BALANCES ARISING FROM CASH TRANSACTIONS DECEMBER 31, 2017 ASSETS Cash $ 804,114 CASH FUND BALANCES Unassigned $ 804,114 See accompanying Notes to Financial Statements. (4) SHERBURNE WRIGHT COUNTY CABLE COMMUNICATIONS COMMISSION STATEMENT OF CASH RECEIPTS, DISBURSEMENTS, AND CHANGES IN CASH FUND BALANCE YEAR ENDED DECEMBER 31, 2017 RECEIPTS Franchise Fees $ 850,279 PEG Capital Fees 133,812 Miscellaneous 46 Total Receipts 984,137 DISBURSEMENTS Franchise Fees Returned to Cities 198,215 Equipment 87,656 Producer 89,877 Contract Labor 103,392 Cable Service 10,200 Postage and Delivery 23 Service Charges 3,011 Insurance 3,864 Professional Fees 4,197 Dues and Subscriptions 39,739 Rent 4,407 Total Disbursements 544,581 NET CHANGE IN CASH FUND BALANCE 439,556 Cash Fund Balance-Beginning of Year 364,558 CASH FUND BALANCE-END OF YEAR $ 804,114 See accompanying Notes to Financial Statements. (5) SHERBURNE WRIGHT COUNTY CABLE COMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Sherburne Wright County Cable Communications Commission (the Commission) is an organized commission having the power, duties, and privileges granted towns by Minn. Stat. ch. 471. The Commission's purpose is to monitor the operation and activities of cable communications and, in particular, the cable communications systems of participating municipalities. The Commission also coordinates the administration and enforcement of the franchise associated with the cable communications systems, promotes the development of locally produced cable television programming, and conducts such other authorized activities as may be necessary to ensure equitable and reasonable rates and service levels for the citizens of participating municipalities. The Commission is located in Minnesota within Sherburne and Wright counties. It is governed by a board of directors who are appointed by each participating municipality. Each municipality is permitted to appoint at least one alternate director. The board of directors includes a board chair, vice chair, treasurer, and secretary who are appointed every 2 years by the board of directors. Reporting Entity Generally accepted accounting principles define the reporting entity as the primary government and its component units. Component units are legally separate organizations for which the primary government is considered to be financially accountable or for which the exclusion of the component unit would render the financial statements of the primary government misleading. The criteria used to determine if the primary government is financially accountable for a component unit include whether or not the primary government appoints a voting majority or the potential component unit's governing body, is able to impose its will on the potential component unit, is in a relationship of financial benefit or burden with the potential component unit, or is fiscally depended upon by the potential component unit. Based on these criteria, there are no organizations considered to be component units of the financial reporting entity. Basis of Accounting Sherburne Wright County Cable Communications Commission follows the cash basis of accounting. The statement of cash receipts and disbursements was prepared on the cash basis and accordingly, receipts and disbursements are recognized only as cash is received or paid out. These statements do not give effect to receivables, payables, accrued expenses, inventories, or property, plant, and equipment assets. Cash Cash consists of a checking account. (6) SHERBURNE WRIGHT COUNTY CABLE COMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Investments State statutes authorize investments which are direct obligations or obligations guaranteed by the United States or its agencies; shares of investment companies registered under the Federal Investment Company Act of 1940 and receives the highest credit rating, is rated in one of the two highest rating categories by a statistical rating agency, and all of the investments have a final maturity of thirteen months or less; general obligations rated "A" or better; revenue obligations rated "AA" or better, general obligations of the Minnesota Housing Finance Agency rated "A" or better; bankers' acceptances of United States' banks eligible for purchase of by the Federal Reserve System; commercial paper issued by United States corporations or their Canadian subsidiaries, of the highest quality category by at least two nationally recognized rating agencies, and maturing in 270 days or less; Guaranteed Investment Contracts guaranteed by a United States commercial bank, domestic branch of a foreign bank, or a United States insurance company, and with a credit quality in one of the top two highest categories, repurchase or reverse purchase agreements and securities lending agreements with financial institutions qualifies as a "depository" by the Commission entity, with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. government securities to Federal Reserve Bank of New York, or certain Minnesota securities broker-dealers. At December 31, 2017, the Commission did not have any of these investments. Receipts and Disbursements Receipts result from exchange transactions associated with the principal activity of the Commission, which is the administration and enforcement of the cable communications systems franchise. Disbursements are defined as expenses directly or indirectly related to, or incurred in support of the cable communications systems franchise. Receipts from public, educational, and governmental programming (PEG) capital fees are restricted for use for disbursements for property, plant, and equipment associated with PEG access. Expenditures for property, plant, and equipment exceeded the PEG capital fees for the year ended December 31, 2017. As such, no amount of cash fund balance is restricted as to use at December 31, 2017. Risk Management The Commission is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets, errors and omissions, and natural disasters. The Commission's member cities provide insurance coverage through their respective insurance programs. Fund Balance In the fund financial statements, governmental funds report components of fund balance to provide information about fund balance availability for appropriation. Restricted fund balance represents amounts available for appropriation but intended for a specific use and is legally restricted by outside parties. Committed fund balance represents constraints on spending that the government imposes upon itself by high-level formal action prior to the close of the fiscal period. Assigned fund balance represents resources intended for spending for a purpose set by the government body itself or by some person or body delegated to exercise such authority in accordance with policy established by the board. Unassigned fund balance is the residual classification for the Commission's General Fund and includes all spendable amounts not contained in the other classifications. (7) SHERBURNE WRIGHT COUNTY CABLE COMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 2 DEPOSITS AND INVESTMENTS The Commission maintains deposits at financial institutions which are authorized by the board of directors. All such depositories are members of the Federal Reserve System. The Commission only uses one financial institution which exposes it to custodial credit risk and concentration of credit risk. These risks are managed through the use of pledged collateral. The Commission does not have a deposit policy for custodial or concentration of credit risk and follows Minnesota Statutes for deposits. Minnesota Statutes require that all of the Commission's deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by insurance on bonds. Authorized collateral includes: (a) United States government treasury bills, treasury notes, treasury bonds; (b) issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; (c) general obligation securities of any state or local government with taxing powers which is rated "A" or better by a national bond rating service, or revenue obligation securities of any state of local government with taxing powers with is rated "AA" or better by a national bond rating service; (d) unrated general obligation securities of a local government with taxing power pledged as collateral against funds deposited by that same local government entity's; (e) irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by written evidence that the bank's public debt is rated "AA" or better by Moody's Investors Service, Inc. or Standard & Poor's Corporation; and (f) time deposits that are fully insured by the Federal Deposit Insurance Corporation. Minnesota Statutes require that collateral be placed in safekeeping in a restricted account at the Federal Reserve Bank or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the depository. As of December 31, 2017, the Commission's deposits were sufficiently collateralized. The Commission's cash balances at December 31, 2017 includes deposits of$804,114. NOTE 3 CONCENTRATIONS The Commission received approximately 92% of its revenues from one cable television service provider for the year ended December 31, 2017. NOTE 4 ON BEHALF OF PAYMENT FOR DIRECTORS The Commission has agreed to pay for basic cable for each of the Directors and appointed alternates for each Member City. Total payments on behalf of the Commission for these services for the year ended December 31, 2017 amounted to $10,200, and is reported as cable service expenditures. (8) SHERBURNE WRIGHT COUNTY CABLE COMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 5 COMMITMENTS The Commission's Restated Joint and Cooperative Agreement (the Agreement) requires the Commission to adopt an annual budget. The Agreement also requires that any payments received in excess of the Commission's budget shall be returned to participating municipalities in the same proportion as each participating municipality's contribution to the Commission budget. Participating municipalities are required to use any returned contributions for cable-related expenses. (9) SUPPLEMENTARY INFORMATION (UNAUDITED) SHERBURNE WRIGHT COUNTY CABLE COMMUNICATIONS COMMISSION SCHEDULE OF ACCOUNTS RECEIVABLE DECEMBER 31, 2017 (UNAUDITED) Fund Source of Revenue and Purpose Amount General Charter Communications-4th Quarter Franchise and PEG Fees $ 226,413 Total $ 226,413 (10) SHERBURNE WRIGHT COUNTY CABLE COMMUNICATIONS COMMISSION SCHEDULE OF ACCOUNTS PAYABLE DECEMBER 31, 2017 (UNAUDITED) Fund Vendor Name Item and Purpose Amount Total $ - (11) CliftonLarsonAllen LLP CLAconnect.corn INDEPENDENT AUDITORS' REPORT ON MINNESOTA LEGAL COMPLIANCE Board of Directors Sherburne Wright County Cable Communications Commission Buffalo, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America, the statement of balances arising from cash transactions of Sherburne Wright County Cable Communications Commission (the Commission) as of December 31, 2017, and the related statement of cash receipts, disbursements, and changes in cash fund balance, and the related notes to the financial statements, and have issued our report thereon dated May 15, 2019. We expressed an adverse opinion on accounting principles generally accepted in the United States of America because the financial statements are prepared on a basis of accounting that demonstrates compliance with the regulatory basis of accounting prescribed or permitted by the Minnesota Office of the State Auditor, which practices differ from accounting principles generally accepted in the United States of America. However, our opinion was unmodified on the financial statements presented under this regulatory basis. The Minnesota Legal Compliance Audit Guide for Other Political Subdivisions, promulgated by the State Auditor pursuant to Minnesota Statutes §6.65, contains six main categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, claims and disbursements, miscellaneous provisions, and tax increment financing. Our audit considered all of the listed categories, except that we did not test for compliance with the provisions for tax increment financing, because this area did not apply to the Commission. In connection with our audit, nothing came to our attention that caused us to believe that the Commission failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Other Political Subdivisions, except as noted in the paragraphs below. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the Commission's noncompliance with the above-referenced provisions, insofar as they relate to accounting matters. During claims and disbursements testing, it was noted that not all claims were paid timely. Minnesota State Statute 471.425 requires that all bills be paid within 35 days of receiving an invoice. During miscellaneous provisions testing, it was noted that the Commission does not have a written out of state travel policy. Minnesota State Statute 471.661 states that all government entities must have an out of state travel policy that controls travel outside of Minnesota for elected officials of the unit of government. @A member of NeXIa (12) International Board of Directors Sherburne Wright County Cable Communications Commission The purpose of this report is solely to describe the scope of our testing of compliance relating to the provisions of the Minnesota Legal Compliance Audit Guide for Other Political Subdivisions, the results of that testing, and not to provide an opinion on compliance. Accordingly, this report is not suitable for any other purpose. CliftonLarsonAllen LLP Buffalo, Minnesota May 15, 2019 (13)