CITY OF ALAMEDA
REQUIRED COMMUNICATIONS
FOR THE YEAR ENDED JUNE 30, 2022
This Page Left Intentionally Blank
CITY OF ALAMEDA
REQUIRED COMMUNICATIONS
For the Year Ended June 30, 2022
Table of Contents
Page
Required Communications.. ...1
Significant Audit Matters:
Qualitative Aspects of Accounting Practices. 1
Difficulties Encountered in Performing the Audit.. ...3 Corrected and Uncorrected Misstatements..
Disagreements with Management... 4
Management Representations..... ..4
Management Consultations with Other Independent Accountants. ..4 Other Audit Findings or Issues... 4
Other Matters ..... ..4
This Page Left Intentionally Blank
MMAZE
_& ASSOCIATES
REQUIRED COMMUNICATIONS
To the City Council of
the City of Alameda, California
We have audited the basic financial statements of the City of Alameda for the year ended June 30, 2022.
Professional standards require that we provide you with information about our responsibilities under following information related to our audit.
Significant Audit Matters
Qualitative Aspects of Accounting Practices
Accounting Policies - Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements.
No new accounting policies were adopted, and the application of existing policies was not changed during the year, except as follows:
Fund Reorganization - with the implementation if its new Enterprise Resource Planning (ERP) system during fiscal year 2022, the City analyzed its various general ledger funds and determined that reorganization and reporting changes for certain funds was necessary. The changes are disclosed in Notes 1R and 3C to the financial statements.
Capitalization of Sewer Capital Projects - beginning July 1, 2021, the City capitalizes sewer projects as costs are incurred, rather than including those costs in construction in progress until the project is complete.
In addition, the following Governmental Accounting Standards Board (GASB) pronouncements became effective:
GASB 87 - Leases
The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments' financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments' leasing activities. т 925.930.0902
Accountancy Corporation F 925.930.0135
3478 Buskirk Avenue, Suite 215 e [email protected] Pleasant Hill, CA 94523 w mazeassociates.com
1 A lease is defined as a contract that conveys control of the right to use another entity's nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment. Any contract that meets this definition should be accounted for under the leases guidance, unless specifically excluded in this Statement.
The pronouncement became effective, and as disclosed in Note 8D to the financial statements required a prior period restatement for the cumulative effect on the financial statements.
GASB 97 - Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans-An Amendment of GASB Statements No. 14 and No. 84, and a Supersession of GASB Statement No. 32
The primary objectives of this Statement are to (1) increase consistency and comparability related to the reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (2) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as fiduciary component units in fiduciary fund financial statements; and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting for Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans) that meet the definition of a pension plan and for benefits provided through those plans.
The pronouncement became effective, and required revisions to the disclosures related to the City's deferred compensation plan as disclosed in Note 9D to the financial statements.
The following pronouncements became effective, but did not have a material effect on the financial statements:
GASB 89 - Accounting for Interest Cost Incurred before the End of a Construction Period GASB 90 - Majority Equity Interests (an amendment of GASB Statements No. 14 and No. 61) GASB 92 - Omnibus 2020
GASB 93 - Replacement of Interbank Offered Rates
GASB 99 - Omnibus 2022 (paragraphs 26-32)
Unusual Transactions, Controversial or Emerging Areas - We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.
Accounting Estimates - Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City's financial statements were:
2 Estimated Net Pension Liabilities, Total Pension Liabilities and Pension-Related Deferred Outflows and Inflows of Resources: Management's estimate of the net pension liabilities, total pension liabilities and deferred outflows/inflows of resources are disclosed in Note 9 to the financial statements and are based on accounting valuations determined by the California Public Employees Retirement System as well as actuarial studies determined by a consultant, which are based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole.
Estimated Net OPEB Liabilities and OPEB-Related Deferred Outflows and Inflows of Resources:
Management's estimate of the net OPEB liabilities and deferred outflows/inflows of resources is disclosed in Note 10 to the financial statements and is based on actuarial valuations determined by a consultant, which is based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole.
Estimated Fair Value of Investments: As of June 30, 2022, the City held approximately $459.1 million of cash and investments as measured by fair value as disclosed in Note 2 to the financial statements. Fair value is essentially market pricing in effect as of June 30, 2022. These fair values are not required to be adjusted for changes in general market conditions occurring subsequent to June 30, 2022.
Estimated Investment in Joint Ventures: Management's estimate of the investment in joint ventures is disclosed in Note 12 to the financial statements and is based on the balances from the audited financial statements of Alameda Municipal Power.
Estimate of Depreciation: Management's estimate of the depreciation is based on useful lives determined by management. These lives have been determined by management based on the expected useful lives of assets as disclosed in Note 1G to the financial statements. We evaluated the key factors and assumptions used to develop the depreciation estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole.
Estimate of Compensated Absences: Accrued compensated absences which are comprised of accrued vacation, holiday, and certain other compensating time is estimated using accumulated unpaid leave hours and hourly pay rates in effect at the end of the fiscal year as disclosed in Note 1I to the financial statements. We evaluated the key factors and assumptions used to develop the accrued compensated absences and determined that it is reasonable in relation to the basic financial statements taken as a whole.
Estimated Claims Liabilities: Management's estimate of the claims liabilities payable is disclosed in Note 11 to the financial statements and is based on actuarial studies determined by :
onsultant, which are based on the claims experience of the City. We evaluated the key factor:
and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole.
Disclosures - The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit's financial statements taken as a whole, other than to record the City's post-closing entries related to leases receivable and related deferred inflows of resources.
Professional standards require us to accumulate all known and likely uncorrected misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. We have no such misstatements to report to the City Council.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, ol auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in a management representation letter dated December 29, 2022.
Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.
Other Matters
We applied certain limited procedures to the required supplementary information that accompanies and supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the required supplementary information and do not express an opinion or provide any assurance on the required supplementary information. 4 We were engaged to report on the supplementary information which accompany the financial statements, but are not required supplementary information. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.
We were not engaged to report on the Introductory and Statistical Sections which accompany the financial statements, but are not required supplementary information. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.
******
This information is intended solely for the use of City Council and management and is not intended to be, and should not be, used by anyone other than these specified parties.
Maye &Associates
Pleasant Hill, California
December 29, 2022
This Page Left Intentionally Blank