Title
Recommendation to Accept the Fiscal Year 2018-19 Audited Financial Statements and Compliance Reports. [City Council/SACIC] (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
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) 2018-19 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 2018-19.
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 1-7.
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, 2019 in April 2020, and has validated the fair presentation of the City’s financial position as of June 30, 2019. Note that the validity of an external audit does not reflect a judgment on the City’s financial position, although the City’s General Fund reserves are healthy. This will be important as the City considers strategies and options to weather the economic impact of the current recession caused by the coronavirus. The audited financial statements contain the basic financials of the City, including Alameda Municipal Power (AMP). The statements also includes the financial statements of the Community Improvement Position as a Private-Purpose Trust Fund. The audited financial statement is separated in to the following two sections:
Financial Section: This section includes the auditor’s opinion letter, 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 Management Letter lists significant deficiencies and one material weakness identified by the auditors during their review and testing. The material weakness was the long delay in the closing of the books for 2018-19. To assist in correcting the deficiencies the City Manager’s Office hired Management Partners to perform an organization assessment of the Finance Department in order to identify the appropriate staffing needed to support department operations. The organization assessment is expected to be finalized in early June.
Additionally, the City is using the services of one a consultant from Management Partners to assist the Acting Finance Director with department operations.
In addition, the Acting Finance Director has acquired the services of an accounting firm, Kevin Harper and Associates, to assist Finance staff in putting together a year-end close process for the 2018-19 fiscal year in the absence of a Finance Director, which is under recruitment. Unfortunately, Finance has relatively new staff in place, and the Shelter in Place restrictions has made staff training and accounting oversight logistically difficult.
The General Fund is the chief unrestricted operating fund of the City. On June 30, 2019, the City’s General Fund had a fund balance of over $41 million, which included unrestricted, available funds of approximately $23.4 million, $16.1 million assigned, available for Council priorities as part of our reserves policy process, covering such items as economic uncertainty and emergencies.
Other Funds’ Reserves as of June 30, 2019 are as follows:
- Net Position in the City’s Sewer Fund totaled $20.05 million and is restricted for sewer system replacement. Working capital in the Sewer Fund (current assets less current liabilities) is $22.9 million.
- Fund balances in the Base Reuse Fund totaled approximately $40.8
- 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:
o Equipment Replacement $6.5 million
o Technology Replacement $6.2 million
o Facilities Replacement $4.8 million
Total $17.5 million
Liabilities:
- The City’s net pension liability was $250.0 million
- The City’s net OPEB liability was $101.8 million after considering the value of the City’s OPEB Trust, which was valued at $14.0 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 will face revenue constraints during the current recession, so their fund balances will be important for future General Fund budget planning. Their fund balances as of June 30, 2019 were:
o Community Development: $0.9 million
o Library $3.6 million
o Recreation $2.2 million
Total $6.7 million
FINANCIAL IMPACT
Acceptance of this report does not affect the City’s budget or its financial condition. The report simply reflects an audit of the City’s financial records for all funds at June 30, 2019.
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).
City Manager Recommendation
Accept the Fiscal Year 2018-19 Audited Financial Statements and Compliance Reports.
Respectfully submitted,
Nancy Bronstein, Interim Finance Director
Exhibits: (Items in yellow have not yet been received)
1. Audited Financial Statement
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