For City Council Meeting August 13, 2024
TO: Honorable Mayor and City Council
FROM: G. Michael Milhiser, Interim City Manager
AUTHOR: Mark Alvarado, Interim Finance Director
Title
Request City Council, Rialto Housing Authority, Rialto Utility Authority and Successor Agency to Accept the Fiscal Year 2022-23 Audit Results and Receive and File the Fiscal Year 2022-23 Financial Report and Related Documents.
(ACTION)
Body
RECOMMENDATION
Staff recommends that the City Council, Rialto Housing Authority, Rialto Utility Authority and Successor Agency accept the Fiscal Year 2022-23 audit results and receive and file the Fiscal Year 2022-23 Annual Financial Report and related documents.
BACKGROUND
August 10, 2021, Lance, Soll & Lunghard (LSL) was chosen through council action to be the external audit firm for the City of Rialto (City). LSL was contracted to do the following:
• Audit all funds
• Prepare the City’s Annual Comprehensive Financial Report an issue an opinion on the basic financial statements.
• Review the Management Discussion & Analysis and the Required Supplemental Information
• Attend audit related City council and Budget Committee meetings by a Principal of the audit firm.
In order to meet the guidelines set forth in Statement No. 1 of the Governmental Accounting Standards Board (GASB), following the close of each fiscal year the City’s external auditors conduct an audit of the City’s financial records and assist in the compilation of the Annual Financial Report. The audit is conducted in conformity with the Generally Accepted Auditing Standards (GAAS), which requires that the independent auditing firm plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement, and that they examine evidence to support the amounts and disclosures in the financial statements. Once complete, an opinion is issued on the fairness of the presentation of the financial position and the results of operations of the financial statements of the City, in conformity with Generally Accepted Accounting Principles (GAAP) as applicable to local governments.
ANALYSIS/DISCUSSION
The annual audit for the fiscal year ended June 30, 2023 has been completed by Lance, Sol & Lunghard, LLP. The audit for the City and the related entities received a clean opinion and present fairly, in all material respects, the respective financial positions of the City. Attached are the following items:
• Annual Financial Report for fiscal year end June 30, 2023
• Appropriations Limit Worksheet with Independent Accountant’s Report on Agreed Upon Procedures Applied to the Appropriations Limit Worksheet
• Communication Letters with those Charged with Governance Letter
Annual Financial Report
This document is a thorough and detailed presentation of the City’s financial state and includes financial statements on the fiscal year’s activities and balances that are audited by the City’s independent auditors. The Report is presented in three sections, which are the Governmental Wide Financial Information, the Notes to the Financial Statements, and the Supplementary Information.
This document is a thorough and detailed presentation of the City’s financial state and includes financial statements on the fiscal year’s activities and balances that are audited by the City’s independent auditors.
The City’s financials are categorized as either governmental activities or business-type activities. The governmental activities include activities like Police, Fire, Public Works, Community Development, and general government. Governmental activities are financed by taxes, revenues from other governmental agencies, state/federal grants, and charges for services. The General Fund revenues were $154.7 million, while the expenditures were $124.6 million. This is a $24.3 million increase to the year-end General Fund reserves. The General Fund year-end reserves total $105.9 million.
Part of the General Fund year-end reserves is the amount set aside for economic uncertainty. That amount is $27.3 million. This balance reconciles to the Treasurer’s investment report. The General Fund unreserved balance is $65.5 million at June 30, 2023.
The business-type activities are services provided by the City that are funded by customer fees. The City’s water, wastewater, and cemetery services are examples of these activities. The total revenue was $52.6 million, and the total expenses were $45.8 million.
Appropriations Limit Worksheet with Independent Accountant’s Report on Agreed Upon Procedures Applied to the Appropriations Limit Worksheet
The auditors have prepared this letter in accordance with standards established by the American Institute of Certified Public Accountants.
Communications with those Charged with Governance Letter
This attached letters communicate to the City Council any significant audit matters such as qualitative aspects of accounting practices, difficulties encountered in performing the audit, corrected and uncorrected misstatements, disagreements with management, management representations, and any other audit findings if they occurred during the audit process. Two audit findings were identified in the letters. The Finance staff has taken corrective action to address these issues for the 2023-24 audit.
ENVIRONMENTAL IMPACT
The action is exempt from California Environmental Quality Act (CEQA) pursuant to Section 15378(b) (5) of the CEQA Guidelines because the preparation of a budget plan is a governmental administrative activity that will not result in direct or indirect physical changes in the environment.
GENERAL PLAN CONSISTENCY
General Plan Guiding Principle 3 - Rialto's Economic Environment Is Healthy and Diverse - specifically, our City government will lead by example, and will operate in an open, transparent, and responsive manner that meets the needs of the citizens and is a good place to do business.
LEGAL REVIEW
The City Attorney's Office has reviewed the staff report.
FINANCIAL IMPACT
Operating Budget Impact
The Fiscal Year 2022-23 Audited Financial Statements are recommended to be received and filed into the City records. There is no direct financial impact related to this action.
Capital Improvement Budget Impact
There is no financial impact to the capital improvement budget as a result of the approval of this item.