Title
Recommendation to Accept the Fiscal Year 2022-23 Audited Financial Statements and Compliance Reports. [City Council/SACIC] (Finance 10024051) [Not heard on April 16, 2024]
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 ten (10) reports for Fiscal Year (FY) 2022-23 issued by the independent auditors.
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 below 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 2022-23.
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 1-10.
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, 2023, and has issued an unmodified (or “clean”) audit opinion validating the fair presentation of the City’s financial position as of June 30, 2023. The City’s Annual Comprehensive Financial Report (ACFR) shows that the City continued to hold a sound financial position for FY 2022-23. 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 96 - Subscription-Based Information Technology Arrangements
The City implemented Governmental Accounting Standards Board (GASB) Statement No. 96, Subscription-Based Information Technology Arrangements. The primary objective of this statement is to provide guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users. This statement 1) defined a SBITA; 2) establishes that a SBITA results in a right-to-use subscription asset, an intangible asset, and a corresponding subscription liability; 3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of the SBITS; and 4) requires note disclosures regarding a SBITA. This Statement required the City to report all of its SBITAs on the statement of net position/balance sheet with SBITA assets, SBITA liabilities, and inflows or outflows of resources based on the payment provisions of the contracts.
The Management Letter (Exhibit 6) lists material weaknesses, other matters, and significant deficiencies identified by the auditors during their review and testing as noted below:
Significant Deficiencies
• 2023-01 - Recording Accounts Payable at Year End
• 2023-02 - Payroll Calculations Errors
• 2023-03 - Timely Processing of Terminated Employees
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 General Fund is the primary unrestricted operating fund of the City. On June 30, 2023, the City’s General Fund had a fund balance of $112.5 million, which included unrestricted, available funds of approximately $59.8 million, $48.6 million assigned, available for City Council priorities as part of our reserves policy process, covering such items as economic uncertainties and emergencies, and $4.1 million in nonspendable form, including prepayments, deposits, and advances to other funds.
Other Funds’ Reserves as of June 30, 2023 are as follows:
• Spendable Net Position in the City’s Sewer Fund totaled $17.1 million and is restricted for sewer system replacement. Working capital in the Sewer Fund (current assets less current liabilities) is $17.3 million.
• Combined spendable fund balances in the Base Reuse Special Revenue Fund and the Alameda Point Capital Projects Fund totaled $48.6 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 |
$8.1 million |
|
Technology Services |
$5.1 million |
|
Facilities Maintenance and Replacement |
$5.4 million |
|
Total |
$18.6 million |
Liabilities
• The City’s net pension liability was $305.4 million.
• The City’s net OPEB liability was $65.5 million after considering the value of the City’s OPEB Trust, which was valued at $21.2 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, 2023 were as follows:
Community Development $1.9 million
Library $6.2 million
Recreation $1.8 million
Total $9.9 million
FINANCIAL IMPACT
Acceptance of this report has no fiscal impact.
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.
Respectfully submitted,
Margaret O’Brien, Finance Director
By,
Ross McCarthy, Controller
Exhibits:
1. Audited Annual Comprehensive Financial Report
2. Gann Limit AUP
3. Measure B Report
4. Measure BB Report
5. Measure F (VRF) Program Report
6. Memorandum on Internal Control
7. Base Reuse Agreed Upon Procedures Report
8. Investments Agreed Upon Procedures Report
9. Required Communications
10. Single Audit Report
cc: Kevin Kearney - City Auditor
Kevin Kennedy - City Treasurer