Title
Recommendation to Accept the Fiscal Year 2023-24 Audited Financial Statements and Compliance Reports. [City Council/SACIC]
Body
To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
Annually, the City of Alameda (City) is subject to financial and compliance audits to be performed by licensed certified public accountants. Staff is presenting for acceptance eleven (11) reports for Fiscal Year (FY) 2023-24 issued by the independent auditors, along with the Popular Annual Financial Report, for a total of twelve (12) reports.
BACKGROUND
The City Charter Article IV, Section 4-2, various financing covenants, and rules associated with restricted funding sources require the City to publish financial statements presented in conformance with Generally Accepted Accounting Principles (GAAP) and to be audited by a firm of licensed certified public accountants. The financial reports noted in the exhibit section of this report include financial statements and supplemental data that summarize the results and operations of all funds and give the financial position of the City and Successor Agency to the former Community Improvement Commission (CIC) for FY 2023-24.
The audited financial statements are a comprehensive document reflecting the financial position of the City. The audited financial statements and the other reports and financial statements are attached as Exhibits 1-12.
DISCUSSION
The City’s external independent audit firm, Maze and Associates (Maze), completed its audit of the annual Financial Statements for the FY ended June 30, 2024, and has issued an unmodified (or “clean”) audit opinion validating the fair presentation of the City’s financial position as of June 30, 2024. The City’s Annual Comprehensive Financial Report (ACFR) shows that the City continued to hold a sound financial position for FY 2023-24. The ACFR contains the basic financials of the City, including Alameda Municipal Power (AMP). The ACFR also includes the financial statements of the Community Improvement Commission (CIC) as a Private-Purpose Trust Fund. The report is separated into the following three (3) sections:
Introductory Section: This section contains the City’s transmittal letter, which highlights accomplishments and discusses economic conditions and outlook. This section also contains a listing of principal officials, a City-wide organization chart and a map of the City.
Financial Section: This section includes the auditor’s opinion letter, the Management Discussion and Analysis (MD&A) of the financial statements, the financial statements for each of the City’s funds and the footnotes to the financial statements. Budget to actual comparisons for many of the funds can be found within these statements.
Statistical Section: This section provides information regarding financial trends, revenues and debt capacity, demographic and economic information, as well as information relating to City operations. This section includes graphs of relevant historical data, which can be useful in analyzing the changes of the financial condition of the City over the last several fiscal years.
The City implemented the following new accounting standards to conform with Government Accounting Standard Board (GASB) Statements, as follows:
GASB 99 - Omnibus 2022
The City implemented Statement No. 99 paragraphs 4 -10 (paragraphs 11-32 were implemented in prior fiscal years ended June 30, 2022 and June 30, 2023). The objectives of this statement and these paragraphs are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation of certain GASB Statements related to financial guarantees and the classification and reporting of derivative instruments within the scope of GASB statement No. 53. These paragraphs of this statement had no material impact to the City's financial statements.
GASB 100 - Accounting Changes and Error Corrections, an amendment of GASB 62
The City implemented Statement No. 100. The primary objective of this statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. This statement had no material impact to the City's financial statements.
The Management Letter lists material weaknesses, other matters, and significant deficiencies identified by the auditors during their review and testing as noted below:
Significant Deficiencies
Ø 2024-01 - Timely Posting of Journal Entries
Ø 2024-02 - Timely Preparation and Review of Quarterly Investment Reports
The Management Letter lists the findings by the auditors during their review and testing. Staff prepared responses to the audit findings that are included in the attached report.
The scope of financial reports presented in conformity with generally accepted accounting principles (GAAP) is broad and data are usually presented at a high level of detail. Such comprehensive and detailed presentations are needed to meet the needs of decision-makers and to demonstrate compliance with legal requirements to oversight bodies and others. Unfortunately, this comprehensive level of detail found in the City’s GAAP reports may confuse or discourage those unfamiliar with accounting and financial reporting. As such, the City has issued its first-ever Popular Annual Financial Report (PAFR) during FY 2023-24 in hopes of encouraging those who need or desire a less detailed overview of the City’s financial activities to stay or become engaged in the City’s overall financial status. The best practices of popular reporting of financial information by the Government Finance Officers Association (GFOA) states that a PAFR “Is a way to communicate selected financial data to a broad audience.”
The General Fund is the primary unrestricted operating fund of the City. On June 30, 2024, the City’s General Fund had a fund balance of $113.6 million, which included unrestricted, available funds of approximately $52.4 million, $50.0 million assigned, available for Council priorities as part of the City’s reserves policy process, covering such items as economic uncertainties and emergencies, and $3.6 million in non-spendable form, including prepayments, deposits, and advances to other funds.
Other Funds’ Reserves as of June 30, 2024 are as follows:
Ø Spendable Net Position in the City’s Sewer Fund totaled $16.2 million and is restricted for sewer system replacement. Working capital in the Sewer Fund (current assets less current liabilities) is $16.8 million.
Ø Combined spendable fund balances in the Base Reuse Special Revenue Fund and the Alameda Point Capital Projects Fund totaled $45.7 million. These funds are governed by many covenants and restrictions and may only be used on specific projects and programs.
The City has set up several internal service funds for the purpose of setting aside dollars for future equipment and facilities purchases or repairs. Working capital (current assets less current liabilities) in these funds were as follows:
|
Fleet Maintenance and Replacement |
$12.1 million |
|
Technology Services |
$4.1 million |
|
Facilities Maintenance and Replacement |
$10.8 million |
|
Total |
$26.9 million |
Liabilities
The City’s net pension liability was $318.9 million.
The City’s net OPEB liability was $66.4 million after considering the value of the City’s OPEB Trust, which was valued at $24.4 million.
Several Special Revenue Funds depend on General Fund transfers to support programs, services, and operations not fully funded by their own revenue sources. These funds may face revenue constraints in the current environment, so their fund balances will be important for future General Fund budget planning.
Fund balances as of June 30, 2024 were as follows:
|
Community Development: |
$1.1 million |
|
Library: |
$5.8 million |
|
Recreation: |
$1.5 million |
|
Total: |
$8.4 million |
FINANCIAL IMPACT
Acceptance of this report does not affect the City’s budget or its financial condition. The report simply reflects audits of the City’s financial records for all funds as of June 30, 2024.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is in conformance with the Alameda Municipal Code and all policy documents.
ENVIRONMENTAL REVIEW
This action is not subject to environmental review as the activity is not a "project" for purposes of the California Environmental Quality Act (CEQA) because it is an organizational or administrative activity of the City that will not result in direct or indirect physical changes in the environment, in accordance with CEQA guidelines, section 15378(b)(5).
CLIMATE IMPACTS
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Accept the Fiscal Year 2023-24 Audited Financial Statements and Compliance Reports.
Respectfully submitted,
Ross McCarthy, Acting Finance Director
Exhibits:
1. Audited Annual Comprehensive Financial Report
2. Popular Annual Financial Report
3. Gann Limit AUP
4. Measure B Report
5. Measure BB Report
6. Measure F (VRF) Program Report
7. TDA (Pedestrian and Bicycle Projects) Report
8. Memorandum on Internal Control
9. Base Reuse Financial Report
10. Investments Agreed Upon Procedures Report
11. Required Communications
12. Single Audit Report
cc:
Kevin Kearney - City Auditor
Kevin Kennedy - City Treasurer