Title
Recommendation to Accept the Fiscal Year (FY) 2015-16 Audited Financial Statements and Compliance Reports. (City Council/SACIC) (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Recommendation to Accept the Fiscal Year (FY) 2015-16 Audited Financial Statements and Compliance Reports
BACKGROUND
The Alameda City Charter Article IV, Section 4-2, various financing covenants, and rules associated with restricted funding sources, require the City of Alameda 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 for FY 2015-16.
The Comprehensive Annual Financial Report (CAFR) is prepared in accordance with nationally recognized reporting standards established by the Governmental Finance Officers Association (GFOA). The CAFR and the other reports and financial statements are attached as Exhibits 1-5. All of the reports are currently available in the Finance section of the City’s website. The combination of the implementation of new accounting standards discussed later and staffing changes have delayed the issuing of the FY 2015-16 CAFR. However, even with the delays, the City was still able to apply for the GFOA award in reporting (which will be awarded in late summer 2017) and meet financial disclosure requirements.
DISCUSSION
The City’s external independent audit firm, Vavrinek, Trine, Day & Co. LLP (VTD), completed its review of the annual Financial Statements for the fiscal year ended June 30, 2016, and has issued an unmodified (or “clean”) audit opinion validating the fair presentation of the City’s financial position as of June 30, 2016. The City’s CAFR shows that the City continued to hold a sound financial position for FY 2015-16. The CAFR contains the basic financial statements of the City, including Alameda Municipal Power (AMP). The CAFR also includes the basic financials of the Successor Agency to the former Community Improvement Commission (CIC) as a Private Purpose Trust Fund. The CAFR is separated in the following 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, a map of the area, and a copy of the award to the City for excellence in financial reporting from the Governmental Finance Officers Association of the United States for Fiscal Year Ended 2015. This report represents the twenty-seventh continuous submittal for the GFOA Award.
Financial Section: This section includes the auditor’s opinion letter, the Management Discussion and Analysis (MD&A) of the financial statements, and the financial statements for each of the City’s major funds and non-major funds in aggregate. Budget to actual comparisons for the General Fund and Special Revenue 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 Statement No. 72 - Fair Value Measurement and Application. This Statement requires disclosures to be made to fair value measurements, the level of fair value hierarchy, and valuation techniques. These disclosures are organized by type of asset or liability reported at fair value. It also requires additional disclosures regarding investments in certain entities that calculate net asset value per share (or its equivalent). The requirements of this Statement were implemented and effective on the financial statements for periods beginning after June 15, 2015. There is no impact from GASB72 on the reporting of the City’s portfolio other than an additional table presentation has been provided, as required, as part of Note 2.
• GASB Statement No. 73 - Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. This Statement establishes requirements for defined benefit pensions that are not within the scope of Statement No. 68, Accounting and Financial Reporting for Pensions, as well as for the assets accumulated for purposes of providing those pensions. The Statement also establishes requirements for defined contribution pensions that are not within the scope of Statement No.68. It also amends certain provisions of Statement No. 67, Financial Reporting for Pension Plans, and Statement No. 68 for pension plans and pensions that are within their respective scopes. This Statement became effective for periods beginning after June 15, 2015. The City adopted the effective provisions of this statement as of July 1, 2015. As a result of this Statement, the City’s two closed pension trust funds have been combined with the City’s General Fund for the financial statements presentation purposes.
• GASB Statement No. 76 -The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. This Statement establishes standards relating to the hierarchy of generally accepted accounting principles. The “GAAP hierarchy” consists of the sources of accounting principles used to prepare financial statements of state and local governmental entities in conformity with GAAP and the framework for selecting those principles. This Statement reduces the GAAP hierarchy to two categories of authoritative principles and addresses the use of authoritative and non-authoritative literature if the accounting treatment for a transaction or other event is not specified within a source of authoritative principles. This statement became effective for periods beginning after June 15, 2015, is applied retroactively, and did not have a significant impact on the City’s financial statements for the year ended June 30, 2016.
• GASB Statement No. 79 - Certain External Investment Pools and Pool Participants. This Statement establishes standards relating to accounting and financial reporting for certain external investment pools and pool participants. This Statement became effective for periods beginning after June 15, 2015, except for certain provisions on portfolio quality custodial credit risk, and shadow pricing. Those provisions are effective for reporting periods beginning after December 15, 2015, and did not have a significant impact on the City’s financial statements for the year ended June 30, 2016.
The General Fund is the chief unrestricted operating fund of the City of Alameda. On June 30, 2016, the City’s General Fund had a fund balance of over $40 million, which included unrestricted, available funds of approximately $27 million and $12 million committed and assigned for long-term obligations, general operations and economic uncertainty. Available retained earnings (i.e. working capital) in the City’s Internal Service Funds totaled approximately $16 million as of June 30, 2016, which was slightly higher than the ending balance in the prior fiscal year, due to an accumulation of reserves for claims outstanding and to meet future OPEB funding as well as equipment and technology replacement needs.
Retained earnings in the City’s Sewer Fund totaled approximately $73 million as of June 30, 2016, which was $6 million greater than the ending balance in the prior fiscal year. Of the over $73 million in retained earnings, $45 million is invested in capital assets, $865,000 is restricted for debt service and $27 million is restricted for sewer system replacement.
Fund balances in the City’s other restricted governmental funds (including Base Reuse/ARRA) totaled approximately $70 million as of June 30, 2016. These funds are governed by many covenants and restrictions and may only be used on specific projects and programs.
FINANCIAL IMPACT
Acceptance of this report does not affect the City’s budget or its financial condition. The report merely reflects an audit of the City’s financial records for all funds at June 30, 2016.
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 exempt under CEQA Guidelines, section 15378(b)(4).
RECOMMENDATION
Accept transmittal of FY15-16 Audited Financial Statements and Compliance Reports
Respectfully submitted,
Elena Adair, Finance Director
Exhibits:
1. City of Alameda Comprehensive Annual Financial Report (CAFR)
2. Alameda County Transportation Commission Measure B Program Financial Statements
3. Alameda County Transportation Commission Measure BB Program Financial Statements
4. Alameda County Transportation Commission Vehicle Registration Fee (VRF) Measure F Program Financial Statements
5. Transportation Development Act Article III Projects Financial Statements
cc: City Auditor
City Treasurer