Title
Recommendation to Accept the Fiscal Year 2017-18 Audited Financial Statements and Compliance Reports. [City Council/SACIC] (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
From: Amy Wooldridge, Interim 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 seven reports for Fiscal Year (FY) 2017-18 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 2017-18.
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 for the year ended June 30, 2018. The CAFR and the other reports and financial statements are attached as Exhibits 1-8.
DISCUSSION
The City’s external independent audit firm, Maze and Associates (Maze), completed its audit of the annual Financial Statements for the Fiscal Year ended June 30, 2018, and has issued an unmodified (or “clean”) audit opinion validating the fair presentation of the City’s financial position as of June 30, 2018. The City’s CAFR shows that the City continued to hold a sound financial position for FY 2017-18. The CAFR contains the basic financials of the City, including Alameda Municipal Power (AMP). The CAFR also includes the financial statements of the CIC as a Private-Purpose Trust Fund. The CAFR is separated in to 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 City, and a copy of an award to the City for excellence in financial reporting from the GFOA of the United States. 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, 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 Statement No. 75 - Accounting and Financial Reporting for Post-Employment Benefits Plans Other Than Pension Plans. The objective of this statement is to address reporting by governments that provide Other Post-Employment Benefits (OPEB) to their employees and for governments that finance OPEB for employees of other governments. This statement is effective for periods beginning after June 15, 2017. The City adopted this statement as of July 1, 2018.
• GASB Statement No. 81 - Irrevocable Split-Interest Agreements. The objective of this statement is to improve accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which government is a beneficiary of the agreement. This statement is effective for periods beginning after December 15, 2016. The City did not have any such agreements to disclose.
• GASB Statement No. 85 - Omnibus. The objective of this statement is to address practice issues regarding the implementation and application of certain GASB Statements. This statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application and OPEB. This statement becomes effective for periods beginning after June 15, 2017. The implementation of the Statement affected OPEB supplementary information disclosure.
• GASB Statement No. 86 - Advance Refunding Resulting in Defeasance of Debt. The objective of this statement is to improve consistency in for in-substance defeasance of debt, improve reporting for prepaid insurance on extinguished debt and financial statements notes regarding defeased debt. This statement becomes effective for periods beginning after June 15, 2017.
The General Fund is the chief unrestricted operating fund of the City. On June 30, 2018, the City’s General Fund had a fund balance of over $41 million, which included unrestricted, available funds of approximately $25 million and $15 million assigned for long-term obligations, general operations and economic uncertainty. Available net position (i.e. working capital) in the City’s Internal Service Funds totaled approximately $26 million as of June 30, 2018, which was higher than the ending balance in the prior fiscal year, due to an accumulation of reserves to meet future pension and OPEB funding as well as equipment and information technology replacement needs.
Net Position in the City’s Sewer Fund totaled approximately $82 million as of June 30, 2018, which was $4 million greater than the ending balance in the prior fiscal year. Of the $82 million in net position, $60 million is invested in capital assets, $791,000 is restricted for debt service and $21 million is restricted for sewer system replacement.
Fund balances in the City’s other restricted governmental funds (including Base Reuse/ARRA) totaled approximately $87 million as of June 30, 2018. 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, 2018.
The Management Letter lists significant deficiencies and other matter identified by the auditors during their review and testing. Staff prepared responses to the audit findings that are included in the report.
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 California Environmental Quality Act Guidelines, section 15378(b)(4).
RECOMMENDATION
Accept the Fiscal Year 2017-18 Audited Financial Statements and Compliance Reports.
Respectfully submitted,
Elena Adair, Finance Director
Exhibits:
1. Comprehensive Annual Financial Report
2. Alameda County Transportation Commission (ACTC) Measure B Report
3. ACTC Measure BB Report
4. ACTC Measure F Program Report
5. Single Audit Report
6. GANN Limit
7. Management Letter
8. Required Communications
cc: City Auditor
City Treasurer