Title
Recommendation to Accept the Fiscal Year 2016-17 Audited Financial Statements and Compliance Reports. (City Council/SACIC) (Finance 2410) [Not heard on February 6, 2018]
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Recommendation to Accept the FY16-17 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 FY16-17.
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 is a comprehensive document reflecting the financial position of the City. The CAFR’s Transmittal Letter, and Management’s Discussion and Analysis provide an overview and analysis of the financial activities of the year ended June 30, 2017. The CAFR and the other reports and financial statements are attached as Exhibits 1-7. All of the reports are currently available in the Finance section of the City’s website.
DISCUSSION
The City’s external independent audit firm, Vavrinek, Trine, Day & Co. (VTD), completed its review of the annual Financial Statements for the Fiscal Year ended June 30, 2017, and has issued an unmodified (or “clean”) audit opinion validating the fair presentation of the City’s financial position as of June 30, 2017. The City’s CAFR shows that the City continued to hold a sound financial position for FY16-17. The CAFR contains the basic financials of the City, including Alameda Municipal Power (AMP) which has been restated as an enterprise fund of the City because AMP in not a legally separate entity. 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 an award to the City for excellence in financial reporting from the Governmental Finance Officers Association of the United States. This report represents the twenty-sixth 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 funds. 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 Statement No. 73 - Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and No. 68. Certain provisions of this statement are effective for periods beginning after June 15, 2016. The City adopted this statement as of July 1, 2016.
• GASB Statement No. 74 - Financial Reporting for Postemployment Benefits Other than Pension Plans. The objective of this statement is to improve the usefulness of information about postemployment benefits other than pensions (other postemployment benefits or OPEB) included in the general purpose external financial reports of state and local governmental OPEB plans for making decisions and assessing accountability. This statement is effective for periods beginning after June 15, 2016. The implementation of the Statement did not have a material effect on the financial statements.
• GASB Statement No. 77 - Tax Abatement Disclosures. This statement requires governments that enter into tax abatement agreements to disclose certain information about the agreements. The requirements of this statement are effective for reporting periods beginning after December 15, 2015. The implementation of the Statement did not have a material effect on the financial statements.
• GASB Statement No. 78 - Pensions Provided through Certain Multiple- Employer Defined Benefit Pension Plans. The objective of this statement is to address a practice regarding the scope and applicability of Statement No. 68, Accounting and Financial Reporting for Pensions. This issue is associated with pensions provided through certain multiple-employer defined benefit pension plans and to state or local governmental employers whose employees are provided with such pensions. The requirements of this statement are effective for reporting periods beginning after December 15, 2015. The implementation of the Statement did not have a material effect on the financial statements.
• GASB Statement No. 80 - Blending Requirements for Certain Component Units - an amendment of GASB No. 14. The objective of this statement is to improve financial reporting by clarifying the financial statement presentation requirements for certain component units. This statement amends the blending requirements established in paragraph 53 of Statement No. 14, The Financial Reporting Entity, as amended. The requirements of this statement are effective for reporting periods beginning after June 15, 2016.The implementation of the Statement did not have a material effect on the financial statements.
• GASB Statement No. 82 - Pension Issues - An Amendment of GASB Statements No. 67, and No. 73. The objective of this Statement is to address certain issues that have been raised with respect to Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and Financial Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and No. 68. Specifically, this Statement addresses issues regarding (1) the presentation of payroll-related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice or financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. The requirements of this Statement are effective for reporting periods beginning after June 15, 2016. The City adopted this statement as of July 1, 2016.
The General Fund is the chief unrestricted operating fund of the City of Alameda. On June 30, 2017, the City’s General Fund had a fund balance of over $50 million, which included unrestricted, available funds of approximately $29 million and $20 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 $18 million as of June 30, 2017, which was 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 $78 million as of June 30, 2017, which was $5 million greater than the ending balance in the prior fiscal year. Of the $78 million in retained earnings, $53 million is invested in capital assets, $783,000 is restricted for debt service and $24 million is restricted for sewer system replacement.
Fund balances in the City’s other restricted governmental funds (including Base Reuse/ARRA) totaled approximately $72 million as of June 30, 2017. 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, 2017.
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 a project under CEQA Guidelines, section 15378(b)(4).
RECOMMENDATION
Accept the Fiscal Year 2016-17 Audited Financial Statements and Compliance Reports.
Respectfully submitted,
Edwin Gato, Acting Finance Director
Exhibits:
1. Comprehensive Annual Financial Report (CAFR)
2. Alameda County Transportation Commission (ACTC) Measure B Financials
3. ACTC Measure BB Financials
4. ACTC Vehicle Registration Fee (VRF) Measure F Program Financials
5. Transportation Development Act Article III Projects Financials
cc: City Auditor
City Treasurer