Westminster City Council/Successor Agency to the Westminster Redevelopment Agency
SUBJECT
Title
Receipt of the Fiscal Year 2023-2024 Annual Comprehensive Financial Report (ACFR) and Related Statements.
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, 2024.
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, 2024. 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 2023-2024 annual audit started in June of 2024 and ended with the issuance of the financial reports in January 2025. 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, 2024 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, 2024, along with comparisons to the fiscal year ended June 30, 2023.
2. Appropriations Limit Worksheet. This report tests the staff’s calculation of the GAAN appropriations limit for fiscal year 2023-2024.
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. The city changed accounting policies related to changes in the financial reporting entity by adopting Governmental Accounting Standards Board (GASB) Statement No. 100, Accounting Changes and Error Corrections, resulting in restatement of the General Fund, Special Gas Tax and Street Improvements Special Revenue Fund, Capital Improvements Capital Projects Fund, and Other Governmental Funds.
4. Independent Auditors’ 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 (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 $209.6 million, an increase of $2.7 million.
• The net position of business-type activity increased by $2.0 million primarily due to approved water increases.
• The net position of governmental activities increased by $670 thousand due to pension accounting adjustments related to market volatility.
• Total revenues were $126 million, and expenditures were $123.3 million.
• The City changed accounting policies related to changes in the financial reporting entity (accounting changes) by adopting Statement of Governmental Accounting Standards Board (GASB) Statement No. 100, Accounting Changes and Error Corrections, in fiscal year 2023-2024. This change in grouping of funds resulted in restatements to the General Fund, Special Gas Tax and Street Improvements Special Revenue Fund, Capital Improvements Capital Projects Fund, and Other Governmental. The restatement resulted in a net impact of $-0- to the City’s previously reported fund balance for total governmental funds of $109,743,335 as of July 1, 2023. Information can be found in Note 16 in the notes to the basic financial statements.
General Fund:
|
Revenue |
$84,440,843 |
|
Expenditures |
77,337,285 |
|
Revenue over Expenditures |
7,103,558 |
|
Net Other Sources/Uses |
(17,703) |
|
Net Change in Fund Balance |
7,085,855 |
|
Fund Balance at July 1, 2023, as Previously Presented |
37,943,268 |
|
Change in Grouping of Funds |
8,837,000 |
|
Fund Balance at July 1, 2023, as Restated |
46,780,268 |
|
Fund Balance at June 30, 2024 |
$53,866,123 |
• The $8.8 million change in grouping of funds, shown in the above table is the impact of implementing GASB Statement No. 100 on the general fund. The following table separates the above table by fund type. The general fund as shown above, now includes funds 100 - general fund and 3 capital project funds, 403 - general city projects, 404 - police projects and 411 - community development projects. The ending balance of $53.9 million combines the general fund balance of $44.3 million and capital project balance of $9.5 million. The $8.8 million beginning balance of the capital projects funds is the amount shown in the change in grouping of funds in the previous table. The general fund and capital projects funds will continue to be accounted for separately but will be combined for financial reporting presentation purposes only.
General Funds (separated by fund type)
|
|
Fund 100 |
Funds 403,404,411 |
Total |
|
Revenue |
$84,361,904 |
$78,939 |
$84,440,843 |
|
Expenditures |
76,197,371 |
1,139,914 |
77,337,285 |
|
Revenue over Expenditures |
8,164,533 |
(1,060,975) |
7,103,558 |
|
Net Transfers |
(1,742,417) |
1,742,417 |
0 |
|
Net Other Sources/Uses |
(17,703) |
0 |
(17,703) |
|
Net Change in Fund Balance |
6,404,413 |
681,442 |
7,085,855 |
|
Fund Balance at July 1, 2023 |
37,943,268 |
8,837,000 |
46,780,268 |
|
Fund Balance at June 30, 2024 |
$44,347,681 |
$9,518,442 |
$53,866,123 |
|
|
|
|
|
• The General Fund ended the year with a $7.1 million increase, and a $53.9 million fund balance (reserves). This was a result of a combination of additional revenue and reduced expenditures. The city has several vacant positions which resulted in savings of $3.2 million. Variances for ambulance revenue and expenditures totaled $3.7 million. Revenue from ambulance services came in $2.4 million above budget projection due to the increased payment per transport for the PPGEMT-IGT program which is the gap funding for Medi-Cal plus contractual savings of $1.3 million. Finally, the return on investment and year end adjustment to market value increased revenue $4 million.
• $38.1 million of the fund balance (reserves) is unassigned and available to spend at Council’s discretion although $9.5 million is allocated to capital projects. $2.6 million is restricted for capital projects from former redevelopment bond funds and $13.1 million, 17% is committed for the emergency reserve in accordance with the City’s reserve policy.
• Revenues totaled $84.4 million and increased $11.3 million over 2022-2023. The largest increases were $3.7 million in taxes, $4.1 million in investment and rentals, $0.9 million in intergovernmental and $2.7 million in charges for service.
• Transaction Use Tax Revenue received was $15.5 million.
• Expenses and transfers out totaled $77.3 million, up $4 million over 2022-2023.
• 74% of expenses were on public safety, 8% on public works, 8% on general government, 5% on community development, 4% on community services and 1% capital outlay.
• Other Postemployment Benefits (OPEB) liability is $43.4 million (section 115 account cash balance at 6/30/24 was $5.9 million).
• Pension liability is $146.0 million (section 115 account cash balance at 6/30/23 - $5.5 million).
Enterprise Fund:
• The Water Utility Funds ended the year with a $2.0 million gain, and $44.1 million fund balance.
• Revenues totaled $20 million, an increase of $1 million from the prior year.
• Total expenses were 18.8 million, an increase of $1.8 million from the prior year.
• Purchased water decreased by $0.5 million.
• Pump and basin increased by $1 million.
• OPEB liability is $5 million.
• Pension liability is $4.4 million.
• Water rates were increased in January 2024.
Internal Service Funds:
• The Internal Service Funds ended the year with a $311 thousand gain, and a net position of $8 million (all internal service funds except risk management and compensation benefits achieved the fund balance policy goal of unrestricted $500k per fund).
• Risk Management claims payable was $2.5 million ($2.6 million prior year).
• Compensation/Benefits claims payable $10.5 million ($9.8 million prior year).
Capital Projects Fund:
• Capital projects decreased $17 million from the implementation of GASB Statement No. 100. The City had previously shown the capital outlay of certain unrestricted and restricted funding sources in the Capital Improvements Capital Projects Fund. The use of the unrestricted and restricted funding was previously shown through transfers of funds to cover the eligible capital costs. To enhance financial reporting, the City has changed the presentation of these funds to include the capital outlay for these unrestricted and restricted funding sources in the fund that provides the resources. The activity remaining in the Capital Improvements Capital Projects Funds represents capital outlay for economic development and internal service funds projects.
• The $13.2 million ending fund balance includes $11.1 million for the Economic Development Fund and $2.1 million for vehicle, information technology and city building projects.
Special Revenue Funds:
• Gas tax and Street Improvements fund balance $13.5 million.
• Parks Dedication ending fund balance $2.9 million.
• Municipal Lighting ending fund balance $10.7 million.
• Special Police Services ending fund balance $1.6 million.
• Housing and Community Development ending fund balance $1.1 million.
• Westminster Housing Authority ending fund balance $24.3 million.
• $2.3 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, 2024 show a positive net change to the General Fund’s fund balance of $7.1 million, resulting in an overall ending fund balance of $53.9 million. Overall, the city had revenues of $126.0 million and expenses of $123.3 million resulting in a $2.7 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