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INDEPENDENT AUDIT OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2017
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RECOMMENDATION
Information item only.
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Summary
This report transmits the final audited Comprehensive Annual Financial Report (CAFR) for the year ended June 30, 2017. A link to the electronic version of the CAFR can be found at the end of this staff report (Attachment A). Included in this CAFR is a supplemental display of Measures A and B schedule of sources and uses on page 174. The Pun Group provided its opinion that the financial statements present fairly, in all material respects, the respective financial position of the City as of June 30, 2017. On February 5, 2018, the Council Audit Committee received, reviewed and took action to accept the independent audit of the CAFR. On February 27, 2018, the City Council also accepted the CAFR.
DISCUSSION
Background
As a general sales tax, Measure A proceeds are part of the City’s General Fund. The City Charter (sections 1910 and 1911) requires the City to prepare a comprehensive annual financial statement and have an annual audit of all City accounts conducted by a firm of certified public accountants. The independent annual audit includes Measure A financial activities. The ballot language and ordinance 2013-07-09-1601 provide that the City will conduct an annual independent audit and that the Measure A Citizen’s Advisory Committee will review and report on the uses of the proceeds.
Annual Audit
The City Charter (Section 1911) requires that the audit is in accordance with generally accepted audit standards for public agencies. Federal and State grant agreements and bond indentures also require the City to have an annual audit. To ensure compliance with these requirements, the City contracts with an independent audit firm. The City’s external and independent audit firm, the Pun Group, completed the independent audit and issued the audit report for the fiscal year ended June 30, 2017.
The CAFR is a comprehensive document reflecting the financial position of all City operations and its related component units. The City prepared the Fiscal Year (FY) 2016-17 CAFR in conformance with Generally Accepted Accounting Principles (GAAP) and with the additional requirements of presentation as set forth by the Government Finance Officers Association. At the request of the Measure A Citizen’s Advisory Committee and under guidance from the Government Finance Officers Association’s Additional Supplementary Information best practices, the City included a Measures A and B Schedule of Sources and Uses on page 174 of the CAFR to provide more detail of Measure A funded activities. 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.
General Fund Results
The General Fund reflects the City’s sound management practices, and prudent financial decisions as steady growth and improved financial results are evident in the audit report for FY 2016-17. Revenues continued to grow slowly, and expenditures were less-than-budgeted. When combined with the Bankruptcy and Fiscal Sustainability Fund and other related funds, the consolidated General Fund balance was $102.7 million. However, the full $102.7 million fund balance includes available and restricted fund balances for the General Fund as well as the Library, Recreation, Boat Launch, Entertainment Venues and Pooled Investment funds. Of the $102.7 million in fund balance, over $13.3 million is set aside for obligations already incurred or is in non-spendable form. The remaining $89.4 million (as of June 30, 2017) was available to allocate in accordance with the Reserve and Fund Balance Policy - General Fund adopted by Council on March 29, 2016. The $89.4 million ending balance was sufficient to set aside $36.2 million as a working capital reserve (unassigned fund balance), restrict $48.2 million for Known Contingencies (committed fund balance) and restrict $5.0 million for Risk-Based reserves (committed fund balance). The working capital reserve of $36.2 million, which is 17% of annual operating expenditures, is the FY 2017-18 beginning available balance. The CAFR financial statements on page 30 reflect the consolidated General Fund balance of $102.7 million in accordance with GASB 34 and include the Council-approved reserves.
All new accounting standards for the year were implemented, and there were no recommended adjustments to the financial records. The Pun Group provided its opinion that the financial statements present fairly, in all material respects, the respective financial position of the City as of June 30, 2017.
Attachment A - The Comprehensive Annual Financial Report for the fiscal year ended June 30, 2017 (can be found on file in the City Clerk’s Office at City Hall) or on the City’s website:
<http://www.stocktongov.com/government/departments/adminServices/finRep.html>