Background

Accompanying your packet is a copy of the Town’s 1999-2000 Comprehensive Annual Financial Report and associated letter to the Council from the Town’s auditors, McGladrey and Pullen, L.L.P. The Comprehensive Annual Financial Report provides the audited financial statements for the Town of Chapel Hill.

Discussion

The Town received a “clean” audit; that is, the auditors found no reportable conditions or weaknesses in the Town’s system of internal controls and related procedures.

The letter you received from the auditors has one new feature required by the American Institute of Certified Public Accountants for the first time this year. The new item is a spreadsheet showing items that the auditors elected to “pass on” in the report. Items that the auditors “pass on” are items that our auditors deem to be immaterial to the overall financial statements. The Town has two such items:

1) The Town recorded only interest paid rather than accrued interest (a difference of $47,256) in our internal service funds for vehicle and computer replacement. For budgetary reporting, we have historically included interest on a cash basis. We will adjust our accounting for accrued interest next year.

2) The Town understated the allowance for doubtful accounts for tax collections by $51,430. The Town receives its tax collection and tax receivable numbers from Orange County. The Orange County auditors completed their work very late in the season. As a result, the Town and the Town’s auditors were unable to carefully evaluate the reasonableness of the allowance for doubtful accounts until after the Comprehensive Annual Financial Report was ready for printing. Collections were not as good for third and prior year taxes as we had anticipated. We will increase the size of the allowance next year. The County collected 99.76% of the total tax levied this year and in the last ten years has never collected below 99% of the tax levied on the Town’s behalf.

We are pleased to present this report to the Council. A representative of McGladrey and Pullen, L.L.P., will make a brief presentation and answer questions as the Council desires.