Westminster City Council/Successor Agency to the Westminster Redevelopment Agency
SUBJECT
Title
Receipt of the Fiscal Year 2022-2023 Annual Comprehensive Financial Report (ACFR) and Related Statements.
End
publichearing
End
From: Erin Backs, Finance Director
Requested by: Administration
Prepared by: Jennifer Anderson, Assistant Finance Director
____________________________________________________________
RECOMMENDED ACTION
Recommendation
Accept the financial reports for the fiscal year ended June 30, 2023.
end
BACKGROUND
The City is required to undergo an annual audit conducted by an independent accounting firm. The firm of Clifton Larson Allen LLP (CLA) conducted the audit for fiscal year ended June 30, 2023. The City issued a Request for Proposal (RFP) for audit services in March of 2021 and CliftonLarsonAllen LLP was selected for a period of three years with two option years.
The FY 2022-2023 annual audit started in June of 2023 and ended with the issuance of the financial reports in February 2024. Based on the audit, CliftonLarsonAllen LLP granted the City an unmodified opinion that the City’s financial statements for the fiscal year ended June 30, 2023 are fairly presented in conformity with GAAP. This is the most favorable conclusion and is commonly known as an “unmodified” or “clean” opinion.
A summary of the reports attached to this staff report are as follows:
1. Annual Comprehensive Financial Report. This is the primary financial report for the City and all its component units. The auditors have issued an unmodified opinion that the financial statements are fairly stated in accordance with generally accepted accounting principles. The transmittal letter and Management’s Discussion and Analysis sections found in the beginning of the report offer readers of the City’s financial statements a narrative overview and analysis of the financial activities for the fiscal year ended June 30, 2023, along with comparisons to the fiscal year ended June 30, 2022.
1. Appropriations Limit Worksheet. This report tests the staff’s calculation of the GAAN appropriations limit for fiscal year 2022-2023.
3. Auditor Communication Letter. This letter communicates certain audit findings and other matters to the City Council and would note any serious failure of management’s policies or practices. The auditors noted no difficulties dealing with management nor any disagreements with management.
4. Independent Auditors’ Report on Internal Controls Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards (City of Westminster). This report would note any deficiencies in the City’s internal control over financial reporting and any noncompliance which would have a direct and material effect on the determination of financial statement amounts. No deficiencies were identified.
5. Air Quality Management District (AQMD) Special Revenue Fund - Financial Statements. An audit was required of the separate financial statements for the Air Quality Management District Special Revenue Fund because the City received more than $100,000 in AQMD funds this past year. The auditor’s reports indicated that the financial statements are fairly stated in accordance with generally accepted accounting principles and that they noted no material weaknesses in internal control over financial reporting, nor any instances of noncompliance with program requirements.
ACFR Highlights:
Government-Wide:
• The City’s net position was $206.9 million, an increase of $24.3 million.
• The net position of business-type activity increased by $2.5 million primarily due to approved water increases.
• The net position of governmental activities increased by $21.8 million due to factors such as decreased internal service fund costs and pension accounting adjustments related to market volatility.
• Total revenues were $115.9 million, and expenditures were $91.6 million.
General Fund:
|
Revenue |
$73,123,611 |
|
Expenditures |
63,310,249 |
|
Revenue over Expenditures |
3,813,362 |
|
Net Other Sources/Uses |
(4,016,536) |
|
Net Change in Fund Balance |
(203,174) |
|
Fund Balance at July 1, 2022 |
38,146,442 |
|
Fund Balance at June 30, 2023 |
$37,943,268 |
• The General Fund ended the year with a $203 thousand loss, and a $37.9 million fund balance (reserves).
• $26.1 million of the fund balance (reserves) is unassigned (available to spend at Council’s discretion). $11.8 million, 17% is committed in accordance with the City’s reserve policy.
• Revenues increased by $3.3 million.
• Transaction Use Tax Revenue:
o Total received was $12.4 million.
o Measure SS expired December 31, 2022, and Measure Y began collections on April 1, 2023. Measure Y sunsets March 31, 2043.
• Expenses increased by $2.8 million.
• 74% of expenses were on public safety, 8% on public works, 8% on general government, 6% on community development and 4% on community services.
• Pension costs increased by $1.6 million.
• Other Postemployment Benefits (OPEB) liability is $44.3 million (section 115 account cash balance at 6/30/23 was $5.1 million).
• Pension liability is $139.5 million (section 115 account cash balance at 6/30/23 - $4.7 million).
Enterprise Fund:
• The Water Utility Funds ended the year with a $2.2 million gain, and $42.1 million fund balance.
• Revenues increased by $70 thousand.
• Expenses increased by $1.9 million.
• Purchased water decreased by $0.8 million.
• Pump and basin increased by $0.6 million.
• OPEB liability is $5.1 million.
• Pension liability is $4.3 million.
• Water rates were increased in January 2023.
Internal Service Funds:
• The Internal Service Funds ended the year with a $3.1 million gain, and a net position of $7.7 million (all internal service funds except risk management achieved the fund balance policy goal of $500k per fund).
• Risk Management claims payable was $2.6 million (down from $4.5 million).
• Compensation/Benefits claims payable $9.8 million (down from $11.9 million).
Capital Projects Fund:
• $13.2 million was spent on various projects including the improvements on Bolsa Avenue, Brookhurst Street, Garden Grove Boulevard and various other street improvements.
• The $30 million ending fund balance includes the $11.8 million Economic Development Fund.
Special Revenue Funds:
• Gas tax and Street Improvements fund balance $4.1 million.
• Parks Dedication ending fund balance $2.2 million.
• Municipal Lighting ending fund balance $8.5 million.
• Special Police Services ending fund balance $1.6 million.
• Westminster Housing Authority ending fund balance $24.6 million.
• $5.4 million of American Rescue Plan funds spent.
FISCAL IMPACT
There is no fiscal impact associated with this item.
LEGAL REVIEW
The City Attorney’s Office has reviewed as to form.
CONCLUSION
The audited financial statements for the fiscal year ended June 30, 2023 show a negative net change to the General Fund’s fund balance of $203 thousand, resulting in an overall ending fund balance of $37.9 million. Overall, the City had revenues of $102.6 million and expenses of $91.6 million resulting in a $24.3 million increase in net position.
ATTACHMENTS
1. Annual Comprehensive Financial Report
2. Appropriations Limit Worksheet
3. Auditor Communication Letter
4. Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards (The City of Westminster)
5. Air Quality Management District - Financial Statements
REVIEWED BY
Erin Backs, Finance Director
Christian Bettenhausen, City Attorney
Christine Cordon, City Manager