TOWN OF ATHERTON, CALIFORNIA
BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2023
Prepared by
FINANCE DEPARTMENT
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TOWN OF ATHERTON
Basic Financial Statements
For the Year Ended June 30, 2023
TABLE OF CONTENTS
Independent Auditor’s Report .............................................................................................................................. 1 Management’s Discussion and Analysis ............................................................................................................... 5 Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Position ...................................................................................................................... 20 Statement of Activities .......................................................................................................................... 21 Fund Financial Statements:
Governmental Funds:
Balance Sheet ..................................................................................................................................... 24 Reconciliation of the Governmental Funds – Balance Sheet with the Statement of Net Position ................................................................................................................ 26 Statement of Revenues, Expenditures, and Changes in Fund Balances ........................................... 28 Reconciliation of the Net Change in Fund Balances – Total Governmental Funds with the Statement of Activities ...................................................................................................... 30
Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual:
General Fund ............................................................................................................................... 31 Special Tax Special Revenue Fund ............................................................................................. 32 Library Special Revenue Fund .................................................................................................... 33
Proprietary Funds:
Statement of Net Position .................................................................................................................. 36 Statement of Revenues, Expenses, and Changes in Fund Net Position ............................................ 37 Statement of Cash Flows ................................................................................................................... 38 Fiduciary Funds:
Statement of Net Position .................................................................................................................. 40
Statement of Changes in Fiduciary Net Position .............................................................................. 41
Notes to Basic Financial Statements .......................................................................................................... 43
TOWN OF ATHERTON
Basic Financial Statements
For the Year Ended June 30, 2023
TABLE OF CONTENTS (Continued)
Required Supplementary Information:
Schedule of Plan’s Proportionate Share of the Net Pension Liability ......................................................... 78 Schedule of Contributions – Pension Plan ................................................................................................... 79 Schedule of Changes in Net OPEB Liability and Related Rations .............................................................. 80 Schedule of Contributions – Retiree Healthcare OPEB Plan ...................................................................... 81 Notes to Schedule of Employer Contributions – Retiree Healthcare OPEB Plan ....................................... 81 Supplementary Information:
Non-Major Governmental Funds:
Combining Balance Sheet ..................................................................................................................... 86 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ................................................................................................................................ 88 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual ................................................................................................ 90 Internal Service Funds:
Combining Statement of Net Position................................................................................................... 94 Combining Statement of Revenues, Expenses, and Changes
in Fund Net Position .......................................................................................................................... 95 Combining Statement of Cash Flows .................................................................................................... 96 Custodial Funds:
Statements of Changes in Assets and Liabilities .................................................................................. 98 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 ...................................................................................................................... 99 INDEPENDENT AUDITOR’S REPORT
To the Honorable Members of the City Council
Town of Atherton, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Atherton, California (Town), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the Table of Contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2023, and the respective changes in financial positions, and, where applicable, cash flows therefore, and the respective budgetary comparison listed in the Table of Contents as part of the basic financial statements, for the year then ended in accordance with accounting principles generally accepted in the Unitive state of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Town and to meet our other ethical responsibilities, in accordance with the relevant ethical requirement relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Town’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
1 Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Town’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and other required supplementary information as listed in the Table of Contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about 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 do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 2 Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The accompanying Supplementary Information, as listed in the Table of Contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements.
Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplementary Information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 21, 2023, on our consideration of the Town’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Town’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town’s internal control over financial reporting and compliance.
Pleasant Hill, California
December 21, 2023
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MANAGEMENT’S DISCUSSION AND ANALYSIS
As management of the Town of Atherton, we offer readers of the Town of Atherton’s financial statements this narrative overview and analysis of the financial activities of the Town of Atherton for the fiscal year ended June 30, 2023. We encourage readers to consider the information presented here.
FINANCIAL HIGHLIGHTS
• The assets of the Town of Atherton exceeded its liabilities at the close of the most recent fiscal year by $95,458,639 (net position).
• The government’s total net position increased by $7,104,276. This includes total revenues of $25,225,619 over total expenditures of $18,21,343. Total revenues decreased $1,628,358 and there was a reduction in total expenses of $1,284,641. The town received higher total tax revenues of only $362,330. This was due to previous year the Town receiving $1,545,233 in Library Tax revenue held in Trust. In the current year the Town only received $931,066, this is a decrease of $614,167 in Library tax revenue due to paying back a portion of advancement of Library funds. All other property taxes were higher than the previous year in the amount of $1,113,848. There were lower other taxes revenues and franchise fees of $132,479 and sales tax of $4,872. Operating grants and contributions had a decrease of $2,766.268. This was due to a reduction in Town Center donations and one time recovery funds. There was a decrease in charges for services of $121,593 and other revenues of $52,621. There was an increase in investment earnings of $949,794 from prior year. The year had a decrease in total expenses of $1,284,641 of which a majority was attributed to an additional recognized pension expense reduction of $182,548, reduction in Net OPEB expense of $1,398,519, additional capital expenditures outlays, and Capital Lease expense cost of $861,871. • The Town recorded a net pension liability of $17,868,828 which is an increase of $5,629,295 to last year. The Miscellaneous employee plan is $6,365,417, an increase of $3,067,828. The Safety plan is $11,503,411, an increase of $2,561,467.
• The Town recorded a net OPEB asset of $426,932. This is a net change increase of $333,588 from last fiscal year.
• As of the close of the current fiscal year, the Town of Atherton’s governmental funds reported combined ending fund balances of $25,864,383 an increase of $4,194,517 in comparison with the prior year. The majority of the increase is due to the completion of construction project expenses for Town Center and ramp up of allocation to Capital improvement fund for capital projects.
• The General Fund is the chief operating account of the Town. At the end of the current fiscal year, the unassigned fund balance for the general fund was $11,055,528 or 62 percent of total general fund expenditures of $17,800,001. The Town has a fund balance policy of not dropping the unassigned fund balance below 15% of the actual annual operating expenditures and the Town balance well exceeds this amount.
• The unassigned General Fund balance increased by $808,506 compared to fiscal year 2021- 2022. Key contributing factors included a decrease of transfers out compared to the prior year and COP lease financing. Transfers out were $4,529,037 compared to last fiscal year transfers out of $4,990,557 from the General Fund. There was a transfer out of $3,340,000 during the year for allocation to Capital Improvement fund for future capital improvement projects, and allocation to the Facility Construction Capital Fund for the construction payment applications towards the Town Center and Library projects. There was an increase in General Fund revenues of $31,028 and a decrease in total expenditures of $3,816,936 year over year. The main decrease in General Fund expenses is due to a reduction of $5million in expense as the Town made a $5million additional discretionary payment toward the CalPERS Public Safety Classic Plan UAL in prior fiscal year. The General Fund maintained excess revenues over expenditures of $4,688,673. With the conclusion of the Town Center project and the Town ramping up Capital Improvement projects included transfers out of culminated in a positive change in fund balance of $159,636 for the fiscal year.
5 OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis are intended to serve as an introduction to the Town of Atherton’s basic financial statements. The Town of Atherton’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other required supplementary information in addition to the basic financial statements themselves.
Government-wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the Town of Atherton’s finances, in a manner similar to private-sector business.
The Statement of Net Position presents information on all of the Town of Atherton’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Town of Atherton is improving or deteriorating.
The Statement of Activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
Both of the government-wide financial statements distinguish functions of the Town of Atherton that are principally supported by taxes and intergovernmental revenues (governmental activities). The governmental activities of the Town of Atherton include general government, planning, building, public safety (Police), and public works.
The government-wide financial statements can be found on pages 20-21 of this report.
Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town of Atherton, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town of Atherton can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.
Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on nearterm inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. 6 The Town of Atherton maintains fourteen individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, Special Tax Special Revenue Fund, and Library Special Revenue Fund, all of which are considered to be major funds.
The Town of Atherton also elected to include Facilities Construction Capital Projects Fund as a major fund. Data from the other ten governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report.
The Town of Atherton adopts an annual appropriated budget for its General Fund, Special Tax Special Revenue Fund, and Library Special Revenue Fund. A budgetary comparison statement has been provided for the General Fund, Special Tax Special Revenue Fund, and Library Special Revenue Fund to demonstrate compliance with this budget.
The basic governmental fund financial statements can be found on pages 24-33 of this report.
Proprietary funds. The Town of Atherton maintains one type of proprietary funds. Internal service funds are an accounting device used to accumulate and allocate costs internally among the Town of Atherton various functions. The Town of Atherton uses internal service funds to account for its fleet of vehicles and equipment, workers’ compensation liability, general and employment liabilities, and employee benefits including compensated absences and other post-employment benefits other than pension. Because all of these services predominantly benefit governmental rather than businesstype functions, they have been included within governmental activities in the government-wide financial statements.
The basic proprietary fund financial statements can be found on pages 36-38 of this report.
Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the Town of Atherton’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds.
The basic fiduciary fund financial statements can be found on pages 40-41 of this report.
Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 43-75 of this report.
Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information providing a budgetary comparison statement for General Fund, Special Tax Special Revenue Fund, and Library Special Revenue Fund. Required supplementary information can be found on pages 31-33 of this report.
The combining statements referred to earlier in connection with nonmajor governmental funds and internal service funds are presented immediately following the required supplementary information.
Combining and individual fund statements and schedules can be found on pages 86-92 of this report.
7 GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the Town of Atherton, assets exceeded liabilities by $95,458,639 at the close of the most recent fiscal year.
By far the largest portion of the Town of Atherton’s net position (84 percent) reflects its investment in capital assets of $79,739,647 (e.g., land, buildings, vehicles, machinery, and equipment) less any related debt used to acquire those assets that are still outstanding. Capital Assets decreased $275,361 due to the construction of the Town Center and Library projects being completed. The Town of Atherton uses capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Town of Atherton’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
Town of Atherton Net Position
2023 2022
Current and other assets $ 37,670,760 $ 33,126,079
Capital assets 85,300,446 85,575,807
Total assets 122,971,206 118,701,886
Deferred Outflow of Resources 11,331,021 10,322,662
Current liabilities 7,733,116 8,312,628
Noncurrent liabilities 23,984,893 19,363,563
Total liabilities 31,718,009 27,676,191
Deferred Inflow of Resources 12,993,994 12,993,994
Net Assets:
Invested in capital assets,
net of related debt 79,739,647 79,287,535
Restricted 11,946,390 7,911,509
Unrestricted 3,772,602 1,155,319
Total net position $ 95,458,639 $ 88,354,363
An additional portion of the Town of Atherton net position $11,946,390 (12.5 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets is $3,772,602 and is being used to meet the government’s ongoing obligations. The implementation of GASB 75 during the fiscal year 2017-18 required the recognition of the entire net OPEB liability. This included a prior period adjustment to the net position in governmental activities and employee benefits fund for a total of $9,738,515. This adjustment was in the unrestricted net position balance in the government-wide statement. There was a decrease in net pension expense of $182,548 and net OPEB expense of $1,398,519 for the fiscal year 2022-23.
The Town procured Capital Lease financing in the amount of $7,680,000 for the Town Center project in fiscal year 2019-20. The outstanding balance of $5,560,799 reduced net investment in Capital Assets to $79,739,647. These were additional adjustments in the unrestricted net position balance along with yearly changes in net pension and OPEB liabilities.
At the end of the current fiscal year, the Town of Atherton reports positive balances for all three categories of net assets related to governmental activities. The prior fiscal year the Town reported positive balances for all three categories.
8 Governmental activities Governmental activities increased the Town of Atherton’s net assets by $7,104,276. The fiscal year 2022-23 included a decrease in recognized pension expense of $182,548. Implementation of GASB statements 68 and 71 in fiscal year 14/15 required the recognition of pension liabilities, deferred outflows, and deferred inflows of resources for pensions, which totaled $12,193,107. Together the recognized pension expense decreases of $182,548 in the fiscal year, this reflects a total adjustment of $12,010,559 to the Total Net Position. For the Fiscal Year end the Town recognized a reduction in OPEB expense of $1,398,519. With the addition of the OPEB pension asset, deferred outflows, and deferred inflows of resources for OPEB, this resulted in a total adjustment amount of $1,225,895 in the current fiscal year. The total Town Net Position is $95,458,639. Without the recognition of pension and OPEB liabilities, the Town would have a total net position of $108,695,093 for FY 2022-23. The Town had a decrease in expenditures of $1,284,641 across major funds and other governmental funds due to decrease pension expense and net OPEB, decreased asset cost additions. The Town has contributed a combined $2,525,954 during the previous seven fiscal years toward the OPEB trust for continued reduction of its unfunded liability.
Town of Atherton’s Changes in Net Position
2023 2022
Revenues:
Program revenues:
Charges for services 3,741,209 $ 3,862,802 $
Operating grants and
contributions 1,451,015 4,217,283
General revenues:
Taxes 19,376,179 19,013,849
Investment earnings 505,975 (443,819)
Other revenues 151,241 203,862
Total revenues 25,225,619 26,853,977
Expenses:
General government 3,379,255 2,295,746
Public works 5,349,654 5,339,135
Police 7,351,636 10,157,445
Building 1,105,653 1,211,104
Planning 935,145 402,554
Total expenses 18,121,343 19,405,984
Change in Net Position 7,104,276 7,447,993
Net assets - Beginning 88,354,363 80,906,370
Net assets - Ending 95,458,639 88,354,363
9 • Charges for services decreased by $121,593 during the year. The decrease was primarily due to General Government and Building charges for services. The Town saw a decrease in General Government charges for services of $176,964. This was due to the Town receiving $100,860 more charges for Heritage Tree Damage fees and receiving $75,804 for vehicle registration fees in the prior year. There was an increase in charges for police services of $99,422. Admin citations had an increase of $102,000 over last year. Other fines and forfeiture had an increase of $1,100 over last year. Muni/vehicle code fines had an increase of $2,613 and special service fee for police had an increase of $1,009. Total Building department charges for services had a decrease of $144,737. There was a slight decrease in permits construction activity during the fiscal year. Building Department revenues had a decrease of $173,772 in building permits, building plan check fees, and tree removal plan check fees from the previous year total of $1,680,760. Zoning and planning fees saw an increase of $31,763 Public Works charges for service had an increase of $68,923. The majority of the increase is due to C&D deposit forfeiture increase of $218,300 from building construction deposits that were forfeited for construction time limit. There was $655,900 in C&D forfeiture last year. The Town encroachment fees decreased $168,929 from the previous year of $591,210. Park revenue fees had an overall decrease of $15,769 from the $157,253 received in previous year. The Town saw a slight slowdown in rental of park facilities.
• Operating grants and contribution decreased by $2,766.268. This was due reduction in Town Center donations and one time recovery funds. A majority of the decrease was due to the Town receiving the America Rescue Plan Fund (ARPA) of $1,707,000 and the Town also received $1,264,132 in donations toward the Town Center project in the previous year. The Town received $28,008 more in Gas Tax and $71,862 more in Measure A transportation tax funding for street projects. The Town also received a $30,393 increase in Measure W transportation sales tax revenue for street projects. The Measure A and Measure W revenue are sales tax driven and are an indication of increase in sales tax.
• Town-wide Property Taxes increased by $499,681 (3 percent) during the year. Total other property taxes had a total increase of $1,113,848, however secured property taxes for the Library had a decrease of $614,167 from the prior year. This is a result of the Town paying back the advancement of secured taxes for completion of the Library project. ERAF revenue decreased $149,648 over the previous year for a total of $2,339,065. There was a slight decrease in sales tax of $4,872 over the previous year. There was a total $132,478 decrease in other taxes, which included $242,426 decrease in Document transfer tax to $506,554 for the year. There was a $93,987 increase in franchise fees for a total of $1,063,409. The majority of the increase is due to receiving an additional payment for Cable franchise fee from the prior year. Business license fees increased by $15,960.
• There was an increase in investment earnings of $949,794 from prior year. This was due to an increase in investments earnings due to the increase in interest rates, and a minimal fair market value positive adjustment to investments in the fiscal year of $80,911. Compared to the previous year there was a major fair market value adjustment of $626,847. • Total Government Activities expenses decreased by $1,284,641 (6.6 percent) during the year.
The Town decrease was across major funds and other governmental funds due to decrease in pension expense, and net OPEB, decreased asset cost additions.
Financial Analysis of the Government’s Funds
As noted earlier, the Town of Atherton uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.
From FY 2011, The Town adopted the provision of Governmental Accounting Standards Board Statement No. 54 (GASB 54), Fund Balance Reporting and Governmental Fund Type Definitions.
Additional information can be found in Note 6 on pages 57 through 59 in the financial statements. 10 Governmental funds:
The focus of the Town of Atherton’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town of Atherton’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.
General Fund is the chief operating fund of the Town of Atherton. At the end of the current fiscal year, the unassigned fund balance of the general fund was $11,055,528, while total fund balance reached $13,917,993. As a measure of the general fund’s liquidity, it is useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 62 percent of the total general fund expenditures of $17,800,001, while total fund balance represents 78 percent of that same amount of total expenditures.
The Town of Atherton’s general fund balance increased by $159,636 during the current fiscal year.
Key factors in the increase are as follows:
• The Council authorized the use of the General Fund unallocated reserve fund balance toward the construction of the Town Center project. With Council direction, the unallocated reserve balance can be appropriated towards operational use, for capital projects, or to pay down liabilities. There was a transfer out of $1,189,037 to the Facility Construction Fund for final construction costs on the Town Center project. The project began in the summer of 2019. There was also a transfer out of $3,340,000 to the Capital Improvement Fund for future Town capital projects. As the Town Center project is completed, the focus is now on projects in the various Town master plans. The previous year total allocations from the General Fund were $3,640,557 to the Facility Construction Fund.
• The General Fund Revenue increased $31,028 from the prior year and there was a $3,816,936 decrease in General Fund operating expenditures. The decrease in expenditures was due to decrease in unfunded CalPERS liability additional discretionary payment of $5 million made toward public safety. In the prior year the town made this additional payment to CalPERS. There were slight increases in equipment purchases, liability, health insurance, increase in operational expenses within General government departments, Planning, and Public Works departments.
We are in the third-year payment of lease financing of Town Center as we paid $861,871. It is a 10-year financing with a 5-year call option. There was an MOU salary increase for the Atherton Police Officers Association and Town employees. In Fiscal Year 2022-23 the CPI increase for Town employees was 4%. The Atherton Police Officer Association and remainder of Town employees salary increase began July 1, 2023.
• The CalPERS employer contribution rate had a slight decrease, as total expense was $7,627 less than the previous year. CalPERS continues to collect the unfunded liability as a dollar amount. The Town payment of the unfunded liability portion for the fiscal year decreased $132,576 to $1,268,243. The total CalPERS expense for the Town decreased $140,203. • Total Property tax revenues increased by $1,102,290. In the previous year property taxes increased by $1,763,766. Secured property taxes increased $520,472. Property Tax in Lieu of VLF had an increase of $609,831 from the previous year. This was due to receiving FY 2020/21 VLF shortfall amount of $572,891. The VLF amount due for FY 2022/23 was $1,527,046, but the Town received $1,101,651. This is a shortfall of $425,395. There is hope that the State FY 2024/25 budget will address this shortfall. ERAF revenue had a decrease of $149,648 for a total of $2,339,065.
• Other taxes (Franchise tax & Document Transfer Tax) decreased by $148,439. A majority of the decrease was in Document Transfer tax of $242,426 over the previous year for a total amount of $506,554. This is an indication of a slowdown in the sale of properties. Franchise Cable fee increased $66,287 over the previous year for a total amount of $169,021. This was due to receiving an additional payment for cable franchise fee from the prior year. 11 • Sales taxes decreased by $4,872 compared to the previous year for a total of $300,138. • The Business License fee increased by $15,960 for a total of $269,739. • Fines and Forfeitures increased by $121,153. A majority of the increase is due to C&D time limit forfeiture of $874,200 realized in the year. The amount in the previous year was $655,900.
Heritage Tree Damage Fee decreased $100,860 over previous year amount of $136,260. • Service Charges decreased by $187,508. A majority of the decrease is attributed to building permit fees, which were $173,585 less than the previous year. Planning fees were $32,063 more than the previous year. There is a continued decrease in building activity, potentially due to interest rate increases. Encroachment permits saw a decrease of $168,929. Administrative code enforcement citations decreased $102,800 for a total of $10,300. • Park revenue had an increase of $11,931 over previous year for an amount of $176,323 as park rental activity had slight increase..
• The Town saw a decrease in miscellaneous revenue of $1,709,959 over the previous year. This was due to the Town receiving America Rescue Plan funds of $1,707,322 in the prior year.
Special Tax Special Revenue Fund has a total fund balance of $550,119, all of which is reserved for street and drainage facility maintenance. The Town no longer receives Parcel Tax revenue and only maintains residual funds from prior years. The Parcel Tax appropriated $245,000 in funding to street maintenance projects. The total 2023 street maintenance projects budgets were $1,500,000.
The fund contributed $443,579 towards slurry seal and overlay street maintenance projects for the 2021-22 fiscal year. These projects did not begin until July 2022. The Parcel Tax Fund also appropriated $250,000 for drainage green infrastructure plan implementation. There was an expenditure of $19,980 for design services. The Town approach is to spend residual monies in the special tax fund within our Town Capital Improvement Program projects until it is depleted. The Town estimates to allocate $110,000 of Parcel Tax to Road Maintenance and Drainage Improvements in Fiscal Year 2023-24.
Library Special Revenue Fund has a total fund balance of $2,486,142 all of which is reserved for remainder of the library operation and construction residual pay back of funds. Revenue was lower than the previous year by $614,167.This is a result of the Town paying back a portion of the advancement of secured taxes for completion of the Library project. The advancement of funds of $5,391,725 was the amount received in FY 2021-22. The secured property taxes in FY 2022-23 were $931,066 as these are excess funds held by San Mateo County Libraries (SMCL). The Library JPA will retain any Excess Funds that it would otherwise restrict and hold for library purposes for the Atherton Library, until the amount of Excess Funds retained by the Library JPA equals the advancement amount. It is anticipated that the amount will be repaid in approximately 3 years. The Library fund funded the new Library construction portion of the Town Civic Center. The fund had $800,918 in expenditures for the construction costs for the Library project and $243,137 in operational expenditures. The anticipated total construction costs for the new library were $20,137,822. In fiscal year 2022-23 there were anticipated calculations of change order close out, and project delays costs on the project.
12 General Fund Budgetary Highlights
During the year, the revenue budget increased by a total of $1,601,693 at mid-year. The following are the main components of the net increase:
• $351,200,000 higher secured and unsecured property tax • $23,064 higher ERAF revenue.
• $284,329 increase in Property Tax in Lieu VLF
• $20,000 higher total sales tax
• $6,000 higher Franchise Fees
• $3,600 higher intergovernmental
• $10,000 higher business license revenue
• $65,000 increase in planning revenue
• $127,000 increase in building revenue
• $16,500 higher total police revenue
• $89,000 lower public works revenue
• $56,000 increase in park program revenue
• $550,000 increase in miscellaneous revenue
During the year there was also a $808,250 increase in appropriations between the original and final amended budget. The following are the main components of the increase:
• $68,750 increase in the building department expenditures for building services contract. This was due to projected growth in building revenue as the contract is based on building revenue.
• $166,500 increase in the administration department for engagement of legal human resources assistance for $120,000. There was a need for $40,000 additional appropriations for the engagement of consultant services for newsletter, website, and other communication.
There was an increase in Environmental program committee budget of $6,500 for event programing.
• $150,000 increase in planning services for the Town and for the ramp up of zoning work related to the Housing Element.
• $43,000 increase for property and liability insurance costs. • $223,000 increase for police department operations. There was an additional need for overtime appropriations in the amount of $193,000 for staffing backfill as personnel were catching up on vacations that were not taken during the pandemic and overtime for mandated and essential training. There was a need for an additional $30,000 for expenses incurred due to the discovery of buried vehicle in the Town. • $157,000 increase for public works operations appropriation. The department had a vacant Senior Engineering position and as a result was using a consultant engineering services to fulfill the need. This required an additional appropriation of $77,000. There was an additional one-time appropriation need of $80,000 for necessary and unanticipated repairs and maintenance needs at various locations at Holbrook Palmer Park. 13 Capital Assets and Debt Administration
Capital assets. The Town of Atherton’s investment in capital assets for its governmental activities as of June 30, 2023, amounts to $85,300,466 (net of accumulated depreciation). This investment in capital assets includes land and land improvements, buildings, furniture and fixtures, machinery and equipment, vehicles, streets, drainage systems, and construction in progress. Construction in progress decreased by $63,876,336. This is attributed to the Town Center and Library buildings being capitalized. There are continued projects in progress for Traffic Safety improvements plan implementation, Park master plan projects, and Atherton train station improvements. The Town Center and Library construction phase comprises $64.15 million of Town new building capitalizations.
2023 2022
Land 690,884 $ $ 690,884
Construction in progress 1,348,398 65,224,734
Building 64,154,616 119,394
Other Improvements 139,636 167,122
Vehicles 357,674 366,349
Computer Equipment/Software 365,532 4,179
Furniture & Fixture 435,855 -
Machinery & Equipment 151,151 36,846
Infrastructure 17,656,700 18,966,299
Total Fixed Assets 85,300,446 85,575,807
Governmental activities
Town of Atherton’s Capital Assets
(net of depreciation)
Additional information about the Town’s capital assets can be found in Note 5 on pages 55 through 57 in the financial statements.
Long-term debt. On June 1, 2020, the Town entered into Lease Agreements with the Public Property Financing Corporation of California, with assignment of the agreement to Capital One Public Financing for lease financing of $7,680,000. This was cash flow lease financing for construction of the Town Center project. It is a ten (10) year financing with a five (5) year call option.
The Town has made its third-yearly lease payments in the amount of $2,561,672, of which includes $2,116,590 toward principle. The Town is part of a Workers’ Compensation self-insurance risk pool with The Cities Group Joint Powers Authority. Over the years the Town has had assessments to cover the negative workers’ compensation reserve. This was due to existing liability claims against the Town’s equity reserve. In the FY 2022-23 budget there was an appropriation of $62,325 for replenishment of the Workers’ Compensation Equity Reserve for 2022. This amount came from the Workers Compensation Fund residual balance in FY 2022/23. There is anticipation that replenishment of any future depleted reserves will come from the Workers Compensation fund. Over the past several years there has been a build-up of net assets in the fund to mitigate the depletion of the reserves and possibly offset any future additional assessments from Cities Group workers’ compensation JPA.
In Fiscal Year 2014-15, GASB 68 and 71 were implemented for Accounting and Financial Reporting for Pensions. This established standards for measuring and recognizing liabilities, deferred outflows of resources, and deferred inflows of resources, and expense/expenditures. The net pension liability increased $5,629,295 over last fiscal year. As of FY 2022-23, the Town of Atherton reports a net pension liability of $17,868,828 and is as follows:
Miscellaneous Employee Plan: $6,365,417
Safety Employees Plan: $11,503,411
14 The Town reported a deferred outflow of resources of $10,478,291 and deferred inflow of resources $4,620,022.
In Fiscal Year 2017-18, GASB 74 and 75 were implemented for the Accounting and Financial Reporting for Postemployment Benefits Other than pensions. This establishes accounting and financial reporting requirements for governments whose employees are provided with OPEB benefits. It also includes requirements similar to pension reporting to address financial reporting for assets accumulated for the purpose of providing OPEB benefits. As of FY 2022-23, the Town of Atherton reports a net OPEB asset of $426,932. This is an increase of $333,588 over last fiscal year.
The increase is due to other assumption changes based on Town service, discount rate, higher investment rate of return, growth, and health care trends.
The Town reported a deferred outflow of resources of $852,730 and inflow of resources $2,505,557 for OPEB.
Additional information on the Town of Atherton’s outstanding debt can be found in note 7 and note 8 on pages 60 through 71 of this report.
Economic Factors and Next Year’s Budgets. Property taxes are still the major revenue source for the Town and comprise 71% of the General Fund revenues. General Fund Property Taxes increased 7.34% to $16,116,493 from the previous year of $15,014,203, an indication that there were new property sales within the town. The Town’s property tax consultant HdL projects that there will be a continued growth increase in sales prices, as fewer homes are for sale. According to HdL, tax revenue is anticipated to level out at 4% to 5% over the next couple of years. Property value increases could be at the maximum 2% CPI, however the high value home prices change of ownership and construction activity on limited inventory in the Town will carry the majority of the increase in property tax revenue in the coming years.
As of FY 2023-24, the Town experienced a Net Taxable Assessed Value increase of 8.15% for a total value of $15.38 Billion. Expectations for FY 2023-24 property tax revenues should show a conservative growth of 4.5% as the housing market prices slightly decrease and home sales trend downward. A result attributed to higher interest rates and fewer properties being offered for sale, HDL Property Tax consultant suggests the Town in future years will be on the conservative assumption on property tax increases ranging from 4.0% to 5.0%. Other General Fund revenues for FY 2023-24 include conservative revenue assumptions and changes in the economy due to increased interest rates. It is important to note the Town’s main source of revenue comes from property taxes. New construction and transfer sales of existing homes drive this increase. The median housing prices decreased by negative 4.75% to $8,100,000. Most other General Fund revenues have seen steady increases over the years based on current trends.
For the current budget, financial assumptions include an increase in property tax revenue projections of approximately 4.5 percent. Building Department and Planning Department revenues are projected to increase by approximately 2.0 percent as construction activity levels off due to current interest rate increases. Staff believes residential improvements and razing of homes will continue as housing inventory is limited. Public Works revenue reflects a 2% increase due to slight building permit activity. All other revenue sources are budgeted between 1.5% to 3% percent. Franchise fees are budgeted at 2% percent based on FY 2022-23 levels. We continue to monitor other Town revenues as we look to get back to normal pre-pandemic levels.
15 The Town has its final residual funds from the Parcel Tax that will be used toward capital projects.
The Town is now turning its focus toward priority capital projects needs in the community. The Town received $2,633,605 in ERAF for the Fiscal Year. This was an increase of $294,541 from FY 2021-
22. ERAF was earmarked in the FY 2022-23 budget as a contribution toward additional allocation for the Town Capital Improvement Projects. With new State guidelines issued to determine a school districts ERAF entitlement, the Town is conservatively setting ERAF at $2.3 million as ERAF remains under threat at the State level. ERAF is considered a vital revenue component for the use on onetime capital projects, reduction of any long-term liabilities, and Town CIP projects and programs. The current use of ERAF is for debt service payments for the lease back financing, long term liabilities, and toward Town capital projects.
The Town’s General Fund operating budget presents a plan for accomplishing the goals and objectives of the City Council within existing resources and core strategy of financial stability in mind.
The FY 2023/24 Operating Budget reflects a positive outlook. With the completion of the Town Center, focus is shifting to other capital projects needs in the Town. There is a renewed focus of capital infrastructure spending on Town Master Plans as we still have many long-term infrastructure needs. The Town continues to implement current City Council priorities focused upon reducing longterm liabilities, addressing capital project needs, and ensuring that operational needs are met. The Town is heavily reliant on property taxes. There is no certainty that the growth will continue at the same pace in recent years, especially with the increase in interest rates. As such the Town continues to explore revenue alternatives to the General Fund. We continue to keep our expenditures in line with our revenues and carefully review our choices for programs and priorities closely monitoring and controlling any discretionary spending. Staff seeks to ensure that the Town’s fiscal position remains positive while continuing current programs, policies, and services. The Town has a tax-exempt lease for cash flow construction financing of the Town Center project. A key characteristic of a tax-exempt lease is a fiscal funding requirement where payments of the lease are dependent upon an annual appropriation by the governing body. This requires that future revenues to the Town be appropriated via installment payments on the debt on an annual basis. The COP amount was $7.68 Million, resulting in an estimated annual debt service for FY 2022-23 of $861,000 and budgeted for FY 2023-24.
The General Fund continues to provide new funding capacity in the next several years for project priorities within the CIP Master Plans. Priority projects are derived from the Bicycle Pedestrian Master Plan, Drainage Master Plan, Green Infrastructure Plan, and Road Improvement Plan. This budget includes a $5.89 million allocation from the Town Unallocated General Fund Balance toward the Town Capital Improvement Fund for CIP projects. This was a result of a review of our Financial Planning Model as we discussed out year saving and spending plans based on Council priorities for the Unallocated General Fund Balance. The process will help in setting aside funding for paying down long-term pension liabilities, COP lease back financing, and capital improvement master plans.
The Town will maintain its annual street maintenance, Neighborhood Traffic Management Action plans, work on Park Master Plan, continue to identify bike pedestrian and drainage maintenance projects. As we continue to review the out-year financial planning, the priorities for use of the Unallocated General Fund Balance will be determined.
During the current fiscal year there has been CIP focus on – • Annual Road Maintenance and Rehabilitation program;
• Green Infrastructure- minor projects;
• Traffic Safety Improvements;
• Bike Pedestrian and identify Drainage projects;
Neighborhood Traffic Management plan; and
• Holbrook Palmer Park Access and Circulation Plan Project; 16 The CIP program serves as a guide in prioritizing community needs through the identification of funding and projects that will be a major focus in the next 5 years. We continue to work on fostering partnerships with other agencies in fulfilling infrastructure needs. Included in the CIP is the improvement of Bike & Pedestrian improvement projects throughout Town as some include Watkins Avenue pedestrian improvements, Selby Lane improvements, and Fair Oaks Lane at Lloyden drive.
Traffic and safety improvements along Alameda De Las Pulgas corridor as these improvements are through grant funding. There are Drainage Master Plan improvements for Atherton Channel assessment and relining upstream of Alameda De La Pulgas, evaluation of drainage of Stockbridge Avenue, Selby Lane, and Almendral Avenue intersections with El Camino. There are also HolbrookPalmer Park Playground improvements, and El Camino Real complete streets Gap closure projects.
There is anticipation that the Atherton Station remodel and the Holbrook-Palmer Park Access and Circulation improvement projects to be completed in the current fiscal year 2023/24. The Town is also working on implementing minor projects from its Green Infrastructure plan mandate.
Paying down long-term liabilities is important to the Town’s fiscal stability. During fiscal year 2022-23 the Town did not make an additional contribution into the OPEB trust to satisfy the minimum annual required contribution for future OPEB liabilities. Total Town contribution to the Trust as of June 30, 2023 is $5,825,270. Beginning March 2023, the retiree health expenses are now being paid out through the PARS Trust. The balance in the PARS Trust as of June 30, 2023 is $8,316,743. The Town maintains a Net OPEB Asset of $426,932.
CalPERS started requiring agencies to pay for their Unfunded Accrued Liabilities (UAL) as dollar amounts rather than a percentage of payroll. This was implemented to recover gains and losses of funded status of plans. Every fiscal year CalPERS invoices municipalities for the unfunded portion of their liabilities. The Town paid $452,652 for Miscellaneous Employees and $815,591 for Public Safety, for a total of $1,268,243 for the PERS unfunded accrued liability portion for FY 2022-23. The anticipated Town UAL portion for FY 2023-24 is $791,076 for public safety and $431,925 for miscellaneous employees. The Town net pension liability is recorded and is based on contributions and investment earnings on the plan. The Town pension liability increased by $5,629,295. The CalPERS board implemented changes to the discount rates, with the discount rate being reduced to
7.375% beginning in FY 2018/19, then to 7.25% in FY 2019/20, 7.0% in FY 2020/21 and 6.8% in FY 2022/23. The CalPERS Board went through its Asset Liability Management (ALM) review in calendar year 2021. The review included the discussion of portfolios with discount rates, adoption of new actuarial assumptions, and strategic asset allocation. The ALM process coincided with an exceptional year of investment returns. The CalPERS investment returns for FY 20/21 were 21.3%.
The double-digit return triggered the CalPERS Funding Risk Mitigation Policy. This policy reduces funding risk only after a great investment year. The 21.3% investment return fell within an additional investment return threshold required for a reduction in the discount rate. In November 2021, the CalPERS board reduced the discount rate to 6.8% and set it as the new baseline rate beginning July 2022. It was discussed that agency plans will likely see increases in both the normal costs and the accrued liabilities, resulting in higher required employer contributions. Analysis on future costs will continue to be a focus as we intend to meet long-term obligations and Town operating expenditures.
The CalPERS investment returns for FY 2022/23 ending June 30, 2023, was 6.2%. The previous fiscal year had a negative 6.1% return on investment. The negative return of 6.1% in FY 2021/22 is reflective in the contribution rates and UAL for FY 2024/25. It is important to note that the investment returns for FY 2022/23 will be reflected in the June 30, 2023 actuarial valuation reports. Any gains and losses will impact employer contribution rates for public agencies in FY 2025/26.
The Town does not currently have any constraints on making its payments and is far better positioned than most agencies that are reliant on sales tax and transient occupancy tax revenues.
OPEB liabilities were included in the financials for the first time in FY 2017-18 and the Town has a net asset of $426,932. The Town began using the PARS OPEB Trust to make payment on retiree health benefits during March 2023.
17 Requests for Information
This financial report is designed to provide a general overview of the Town of Atherton’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, 91 Ashfield Road, Atherton, CA 94027 or www.ci.atherton.ca.us. 18 TOWN OF ATHERTON
STATEMENT OF NET POSITION AND
STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize all of the Town’s financial activities and financial position. They are prepared on the same basis as is used by most businesses, which means they include all of the Town’s assets and liabilities, as well as all its revenues and expenses. This is known as the full accrual basis—the effect of all the Town’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between Town funds have been eliminated.
The Statement of Net Position reports the difference between the Town’s total assets and the Town’s total liabilities, including all the Town’s capital assets. The Statement of Net Position presents similar information to the old balance sheet format, but presents it in a way that focuses the reader on the composition of the Town’s net position, by subtracting total liabilities and deferred inflow of resources from total assets and deferred outflow of resources.
The Statement of Net Position summarizes the financial position of all of the Town’s Governmental Activities in a single column, and the financial position of all of the Town’s Business-Type Activities in a single column. These columns are followed by a Total column that presents the financial position of the entire Town.
The Town’s Governmental Activities include the activities of its General Fund, along with all its Special Revenue, and Capital Projects Funds.
The Statement of Activities reports increases and decreases in the Town’s net position. It is also prepared on the full accrual basis, which means it includes all the Town’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis used in the fund financial statements, which reflect only current assets, current liabilities, available revenues and measurable expenditures.
The Statement of Activities presents the Town’s expenses, listed by program. Program revenues—that is, revenues which are generated directly by these programs—are then deducted from program expenses to arrive at the net expense of governmental program. The Town’s general revenues are then listed in the Governmental Activities column, as appropriate, and the Change in Net Position is computed and reconciled with the Statement of Net Position.
These financial statements, along with the fund financial statements and footnotes, are called Basic Financial Statements.
19 TOWN OF ATHERTON
STATEMENT OF NET POSITION
JUNE 30, 2023
Governmental
Activities
ASSETS
Cash and investments (Note 3) $36,472,389
Receivables:
Taxes 549,624
Grants 39,216
Interest 84,919
Other 51,587
Prepaid expenses 46,093
Net OPEB Asset, due in more than one year (Note 8) 426,932 Capital assets (Note 5):
Non-depreciable 2,039,282
Depreciable, net 83,261,164
Total Capital Assets 85,300,446
Total Assets 122,971,206
DEFERRED OUTFLOWS OF RESOURCES
Related to pensions (Note 7) 10,478,291
Related to OPEB (Note 8) 852,730
Total Deferred Outflows of Resources 11,331,021
LIABILITIES
Accounts payable 813,156
Accrued liabilities 444,580
Deposits payable 4,718,142
Deferred revenue
Unearned revenue 24,198
Claims payable (Note 9)
Due in less than one year 62,590
Compensated absences (Note 1G)
Due in less than one year 613,272
Due in more than one year 483,101
Other Long term liabilities (Note 10)
Due in less than one year 1,057,178
Due in more than one year 5,632,964
Net pension liability, due in more than one year (Note 7) 17,868,828 Total Liabilities 31,718,009
DEFERRED INFLOWS OF RESOURCES
Related to pensions (Note 7) 4,620,022
Related to OPEB (Note 8) 2,505,557
Total Deferred Inflows of Resources 7,125,579
NET POSITION (Note 6):
Net investment in capital assets 79,739,647
Restricted for:
Streets and drainage maintenance and police services 1,220,781 Library operations 2,486,142
Public facilities constructions 285,768
Special revenue projects 2,415,414
Capital projects 5,538,285
Unrestricted 3,772,602
Total Net Position $95,458,639
See accompanying notes to financial statements
20 TOWN OF ATHERTON
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2023
Net (Expenses)
Revenue and
Changes in
Net Position
Operating Capital
Charges for Grants and Grants and Governmental
Functions/Programs Expenses Services Contributions Contributions Activities Primary Government:
General government $3,379,255 $37,200 ($17,104) ($3,359,159) Public works 5,349,654 1,641,841 1,095,042 $346,932 (2,265,839) Police 7,351,636 192,741 26,145 (7,132,750)
Building 1,105,653 1,548,385 442,732
Planning 935,145 321,042 (614,103)
Total Governmental Activities $18,121,343 $3,741,209 $1,104,083 $346,932 (12,929,119) General revenues:
Taxes:
Property taxes 17,236,339
Sales taxes 300,138
Other taxes 1,839,702
Total Taxes 19,376,179
Investment earnings 505,975
Miscellaneous 151,241
Total General Revenues 20,033,395
Change in Net Position 7,104,276
Net Position-Beginning 88,354,363
Net Position-Ending $95,458,639
See accompanying notes to financial statements
Program Revenues
21 This Page Left Intentionally Blank
MAJOR GOVERNMENTAL FUNDS
The funds described below were determined to be Major Funds by the Town in fiscal 2023. Individual non-major funds may be found in the Supplemental Section.
GENERAL FUND
The General Fund accounts for all the general revenues and financial resources of the Town not specifically levied or collected for the other Town funds, as well as the related expenditures.
SPECIAL TAX SPECIAL REVENUE FUND
Accounts for parcel tax assessments received from property owners to be used for maintenance of streets drainage and police services. The tax assessment is no longer collected. Fiscal year 2017-18 was the last year of collection. Residual funds remain.
LIBRARY SPECIAL REVENUE FUND
Accounts for the property tax funds dedicated to the Town’s library operations.
FACILITIES CONSTRUCTION CAPITAL PROJECTS FUND
Accounts for the funds dedicated to facilities construction.
CAPITAL IMPROVEMENT CAPITAL PROJECTS FUND
Accounts for capital improvement construction costs and financing sources. 23 TOWN OF ATHERTON
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2023
Facilities Capital
Special Library Construction Improvement
Tax Special Special Capital Capital
General Fund Revenue Fund Revenue Fund Projects Fund Projects Fund ASSETS
Cash and investments (Note 3) $19,046,861 $606,553 $2,497,721 $287,739 $4,648,365 Receivables:
Taxes 454,842
Grants 7,485 31,731
Interest 84,919
Other 51,587
Prepaids 46,093
Total Assets $19,691,787 $606,553 $2,497,721 $287,739 $4,680,096
LIABILITIES
Accounts payable $586,874 $56,434 $11,579 $1,971 $114,894 Accrued liabilities 444,580
Unearned revenue 24,198
Deposits payable 4,718,142
Total Liabilities 5,773,794 56,434 11,579 1,971 114,894
FUND BALANCES
Fund balance (Note 6):
Nonspendable 46,093
Restricted 550,119 2,486,142
Committed 2,670,000
Assigned 146,372 285,768 4,565,202
Unassigned 11,055,528
Total Fund Balances 13,917,993 550,119 2,486,142 285,768 4,565,202 Total Liabilities and Fund Balances $19,691,787 $606,553 $2,497,721 $287,739 $4,680,096 See accompanying notes to financial statements
Major Funds
24 Other Total
Governmental Governmental
Funds Funds
$3,998,355 $31,085,594
94,782 549,624
39,216
84,919
51,587
46,093
$4,093,137 $31,857,033
$33,978 $805,730
444,580
24,198
4,718,142
33,978 5,992,650
46,093
4,026,436 7,062,697
2,670,000
32,723 5,030,065
11,055,528
4,059,159 25,864,383
$4,093,137 $31,857,033
25 TOWN OF ATHERTON
Reconciliation of the
GOVERNMENTAL FUNDS -- BALANCE SHEET
with the
STATEMENT OF NET POSITION
JUNE 30, 2023
Total fund balances reported on the governmental funds balance sheet $25,864,383 Amounts reported for Governmental Activities in the Statement of Net Position are different from those reported in the Governmental Funds above because of the following:
CAPITAL ASSETS
Capital assets used in Governmental Activities are not current assets or financial resources and therefore are not reported in the Governmental Funds. 84,942,769
ALLOCATION OF INTERNAL SERVICE FUND NET POSITION
Internal service funds are not governmental funds. However they are used by management to change the costs of certain activities, such as insurance and central services and maintenance to individual governmental funds. The net current assets of the Internal Service Funds are therefore included in the Governmental Activities in the following line items in the Statement of Net Position.
Cash and investments 5,386,795
Capital assets, net 357,677
Accounts payable (7,426)
Compensated absences (1,096,373)
Claims payable (62,590)
DEFERRED INFLOWS AND OUTFLOWS OF RESOURCES
The balances below are not due and payable in the current period and therefore not reported in the funds:
Deferred outflows related to pensions 10,478,291
Deferred inflows related to pensions (4,620,022)
Deferred outflows related to OPEB 852,730
Deferred inflows related to OPEB (2,505,557)
LONG-TERM ASSETS (LIABILITIES)
The Assets( liabilities) below are not counted in the current period and therefore is not reported in the Funds:
Other long term liabilities (6,690,142)
Net OPEB asset (liabilities) 426,932
Net pension liability (17,868,828)
NET POSITION OF GOVERNMENTAL ACTIVITIES $95,458,639
See accompanying notes to financial statements
26 This Page Left Intentionally Blank
TOWN OF ATHERTON
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2023
Special Facilities Capital
Tax Special Library Construction Improvement
Revenue Special Capital Capital
General Fund Fund Revenue Fund Projects Fund Projects Fund
REVENUES
Property taxes $16,116,493 $931,066
Sales taxes 300,138
Other taxes 1,569,963
Measure A grants
From other governmental agencies 31,145 $49,932
Permit and licenses 269,739 4,810
Fines and forfeitures 974,993
Service charges 2,696,853
Use of money and property 450,603 $7,366 130 $3,495 56,453 Miscellaneous 78,747 297,000 11,000
Total Revenues 22,488,674 7,366 931,196 300,495 122,195
EXPENDITURES
Current:
General government 3,327,227
Planning 935,145
Building 1,171,571
Police 8,815,919
Public works 2,314,415 443,579 75,690
Non-departmental 243,137
Capital outlay 373,853 19,981 1,693,309 175,162
Debt service:
Principal 727,473
Interest 134,398
Total Expenditures 17,800,001 463,560 243,137 1,768,999 175,162
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 4,688,673 (456,194) 688,059 (1,468,504) (52,967) Other Financing Sources (uses):
Proceeds from leases
Transfers in (Note 4) 548,854 1,441,101 3,340,000
Transfers (out) (Note 4) (4,529,037) (800,918)
Total Other Financing Sources (uses) (4,529,037) (252,064) 1,441,101 3,340,000 Net change in fund balances 159,636 (456,194) 435,995 (27,403) 3,287,033 BEGINNING FUND BALANCES 13,758,357 1,006,313 2,050,147 313,171 1,278,169 ENDING FUND BALANCES $13,917,993 $550,119 $2,486,142 $285,768 $4,565,202 See accompanying notes to financial statements
Major Funds
28 Other Total
Governmental Governmental
Funds Funds
$188,780 $17,236,339
300,138
1,569,963
524,932 524,932
548,006 629,083
274,549
974,993
2,696,853
48,560 566,607
386,747
1,310,278 25,160,204
3,327,227
935,145
1,171,571
8,815,919
23,047 2,856,731
243,137
491,781 2,754,086
727,473
134,398
514,828 20,965,687
795,450 4,194,517
5,329,955
(5,329,955)
795,450 4,194,517
3,263,709 21,669,866
$4,059,159 $25,864,383
29 TOWN OF ATHERTON
Reconciliation of the
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
with the
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2023
The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance, which measures only changes in current assets, current liabilities and current deferred outflows/inflows of resources on the modified accrual basis, with the Change in Net Position of Governmental Activities reported in the Statement of Activities, which is prepared on the full accrual basis.
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $4,194,517 Amounts reported for governmental activities in the Statement of Activities are different because of the following:
CAPITAL ASSETS TRANSACTIONS
Governmental Funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense.
The capitalized expenditures are therefore added back to fund balance 1,961,358 Depreciation expense is deducted from the fund balance (2,220,520)
ACCRUAL OF NON-CURRENT ITEMS
The amounts below included in the Statement of Activities do not provide or (require) the use of current financial resources and therefore are not reported as revenue or expenditures in governmental funds (net change):
Principal payments 1,040,889
Net OPEB liabilities and OPEB-related deferred outflows/inflows of resources 1,398,519 Net pension liabilities and pension-related deferred outflows/inflows of resources 182,548
ALLOCATION OF INTERNAL SERVICE FUND ACTIVITY
Internal Service Funds are used by management to charge the costs of certain activities such as equipment acquisition, maintenance, and insurance to individual funds.
The portion of the net revenue (expense) of these Internal Service Funds arising out of their transactions with governmental funds is reported with governmental activities, because they service those activities.
Change in Net Position - All Internal Service Funds 546,965 CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $7,104,276 See accompanying notes to financial statements
30 TOWN OF ATHERTON
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2023
Variance with
Budgeted Amounts Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:
Property taxes $15,874,178 $15,874,178 $16,116,493 $242,315 Sales taxes 295,000 295,000 300,138 5,138
Other taxes 1,768,980 1,768,980 1,569,963 (199,017)
Permits and licenses 268,000 268,000 269,739 1,739
Fines and forfeitures 127,000 127,000 974,993 847,993
From other governmental agencies 83,000 83,000 31,145 (51,855) Service charges 3,074,140 3,133,040 2,696,853 (436,187) Use of money and property 295,008 295,608 450,603 154,995 Other 113,400 113,400 78,747 (34,653)
Total Revenues 21,898,706 21,958,206 22,488,674 530,468 EXPENDITURES:
Current:
General government
City council 61,513 56,513 56,531 (18)
Administration 1,011,073 1,377,746 1,359,912 17,834
City attorney 310,000 310,000 282,725 27,275
Finance 895,096 895,096 842,676 52,420
Non-departmental 743,468 786,468 784,183 2,285
General government total 3,021,150 3,425,823 3,326,027 99,796 Planning 611,471 951,471 935,145 16,326
Building 1,452,283 1,521,033 1,171,571 349,462
Public works 2,984,236 3,115,546 2,314,415 801,131
Police 9,017,552 9,243,651 8,815,919 427,732
Capital outlay 736,457 743,689 373,853 369,836
Debt Service 863,071 863,071 863,071
Total Expenditures 18,686,220 19,864,284 17,800,001 2,064,283
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 3,212,486 2,093,922 4,688,673 2,594,751
OTHER FINANCING SOURCES USES
Proceeds from leases
Transfers (out) (Note 4) (3,793,135) (4,529,037) (735,902) NET CHANGE IN FUND BALANCE $3,212,486 ($1,699,213) 159,636 $1,858,849 BEGINNING FUND BALANCES 13,758,357
ENDING FUND BALANCES $13,917,993
See accompanying notes to financial statements
31 TOWN OF ATHERTON
SPECIAL TAX SPECIAL REVENUE FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2023
Variance with
Budgeted Amounts Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:
Use of money and property $7,366 $7,366
Total Revenues 7,366 7,366
EXPENDITURES:
Current:
Public works $245,000 $652,970 443,579 209,391
Capital outlay 250,000 269,945 19,981 249,964
Total Expenditures 495,000 922,915 463,560 459,355
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (495,000) (922,915) (456,194) 466,721 Net change in fund balance ($495,000) ($922,915) (456,194) $466,721 Fund Balance, beginning of year 1,006,313
Fund Balance, end of year $550,119
See accompanying notes to financial statements
32 TOWN OF ATHERTON
LIBRARY SPECIAL REVENUE FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2023
Variance with
Budgeted Amounts Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:
Property taxes $249,000 $249,000 $931,066 $682,066
Use of money and property 25,000 25,000 130 (24,870)
Total Revenues 274,000 274,000 931,196 657,196
EXPENDITURES:
Current:
Library Maintenance 248,909 248,909 243,137 5,772
Total Expenditures 248,909 248,909 243,137 5,772
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 25,091 25,091 688,059 662,968
OTHER FINANCING SOURCES (USES)
Transfers in (Note 4) 548,854 548,854
Transfers (out) (Note 4) (300,000) (300,000) (800,918) (500,918) Total Other Financing Sources (Uses) (300,000) (300,000) (252,064) 47,936 NET CHANGES IN FUND BALANCE ($274,909) ($274,909) 435,995 $710,904 BEGINNING FUND BALANCE 2,050,147
ENDING FUND BALANCE $2,486,142
See accompanying notes to financial statements
33 This Page Left Intentionally Blank
PROPRIETARY FUNDS
INTERNAL SERVICE FUNDS
Internal Service Funds account for special activities and services performed by a designated Town department on a cost reimbursement basis.
The concept of major funds does not extend to internal service funds because they do not do business with outside parties. For the Statement of Activities, the net revenue or expenses of the internal service fund is eliminated by netting them against the operations of the other Town departments which generated them.
The remaining balance sheet items are consolidated with these same funds in the Statement of Net Position. 35 TOWN OF ATHERTON
PROPRIETARY FUND
STATEMENT OF NET POSITION
JUNE 30, 2023
Governmental
Activities -
Internal Service
Funds
ASSETS
Current assets
Cash and investments (Note 3) $5,386,795
Total current assets 5,386,795
Noncurrent Assets:
Capital assets (Note 5):
Depreciable 1,861,066
Less accumulated depreciation (1,503,389)
Total capital assets 357,677
Total noncurrent assets 357,677
Total Assets 5,744,472
LIABILITIES
Current liabilities:
Accounts payable 7,426
Compensated absences (Note 1G) 613,272
Claims payable (Note 9) 62,590
Total current liabilities 683,288
Non-current liabilities:
Compensated absences (Note 1G) 483,101
Total noncurrent liabilities 483,101
Total Liabilities 1,166,389
NET POSITION (Note 6):
Net investment in capital assets 357,677
Unrestricted 4,220,406
Total Net Position $4,578,083
See accompanying notes to financial statements
36 TOWN OF ATHERTON
PROPRIETARY FUND
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2023
Governmental
ActivitiesInternal Service
Funds
OPERATING REVENUES
Charges for services $2,217,859
Total Operating Revenues 2,217,859
OPERATING EXPENSES
Insurance 789,962
OPEB expense 335,220
Employee benefits earned 317,876
Depreciation 156,307
Supplies and maintenance 136,944
Total Operating Expenses 1,736,309
Operating Income (Loss) 481,550
NONOPERATING REVENUES (EXPENSES)
Interest income 65,415
Total Nonoperating Revenues 65,415
Change in net position 546,965
BEGINNING NET POSITION 4,031,118
ENDING NET POSITION $4,578,083
See accompanying notes to financial statements
37 TOWN OF ATHERTON
PROPRIETARY FUND
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2023
Governmental
ActivitiesInternal Service
Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Interdepartmental charges $2,225,909
Payments to employees for benefits (523,441)
Payments to suppliers (960,131)
Cash Flows from Operating Activities 742,337
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Acquisition of capital assets, net (140,108)
Cash Flow from Capital and Related Financing Activities (140,108)
CASH FLOWS FORM INVESTING ACTIVITIES
Interest received 65,415
Cash Flow from Investing Activities 65,415
Net Cash Flows 667,644
Cash and investments at beginning of period 4,719,151
Cash and investment at end of period $5,386,795
Reconciliation of Operating Income to Cash Flows
from Operating Activities
Operating income $481,550
Adjustments to reconcile operating income to cash flows from operating activities:
Depreciation 156,307
Changes in assets and liabilities:
Accounts receivable 8,050
Accounts payable 4,185
Compensated absences 129,655
Cash Flows from Operating Activities $742,337
See accompanying notes to financial statements
38 FIDUCIARY FUNDS
FIDUCIARY FUNDS
Town has only one type of Fiduciary Funds: Custodial Funds The Custodial Funds are used to account for monies held by the Town in a custodial capacity are as follows:
H-P PARK IMPROVEMENT FUND donated for Holbrook-Palmer Park Foundation TREE COMMITTEE Fund maintained for the Atherton Tree Committee 39 TOWN OF ATHERTON
FIDUCIARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2023
Custodial Funds
H-P Park Tree
Improvement Fund Committee Total
ASSETS
Cash and investments (Note 3) $6,637 $26,765 $33,402
Total Assets 6,637 26,765 33,402
NET POSITION
Restricted for organizations 6,637 26,765 33,402
Total Net Position $6,637 $26,765 $33,402
See accompanying notes to financial statements
40 TOWN OF ATHERTON
FIDUCIARY FUND
STATEMENT OF CHANGES IN FIDUCIARY
NET POSITION
FOR THE YEAR ENDED JUNE 30, 2023
Custodial Funds
H-P Park Tree
Improvement Fund Committee Total
ADDITIONS
Interest income $80 $325 $405
Total additions 80 325 405
DEDUCTIONS
Distributions
Total deductions
Change in net position 80 325 405
BEGINNING NET POSITION 6,557 26,440 32,997
ENDING NET POSITION $6,637 $26,765 $33,402
See accompanying notes to financial statements
41 This Page Left Intentionally Blank
TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Town of Atherton (the Town) was incorporated as a general law City in 1923 and is situated between the cities of Menlo Park and Redwood City on the Peninsula of the San Francisco Bay Area. The Town operates under the Mayor-Council-Manager form of government. There are five Council Members who serve overlapping terms of four years, and the Council, in turn, elects one of the Council Members to serve as Mayor for one year. The Town provides the following services: public safety (police), public works and streets, park, building and planning, and general administration services.
The financial statements and accounting policies of the Town conform with generally accepted accounting principles applicable to governments. The Government Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles.
Significant accounting policies are summarized below:
A. Reporting Entity
The accompanying basic financial statements present the financial activity of the Town of Atherton, which is the primary government presented, along with the financial activities of its blended component unit Atherton Channel District, which is financially accountable, controlled by and dependent on the Town. Although it is separate legal entity, the blended component unit is in substance part of the Town’s operations and is therefore reported as an integral part of the Town’s financial statements.
The Atherton Channel District was established to assist in the maintenance and rehabilitation of the areas within the Town determined to be in the flood plain of the local stream. The District has all accounting and administrative functions performed by Town staff and the District receives property taxes to finance operations. The financial activities of the District have been included in the Atherton Channel District Capital Projects Fund in the accompanying basic financial statements.
B. Basis of Presentation
The Town’s Basic Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. The Government Accounting Standards Board is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the U.S.A.
These Standards require that the financial statements described below be presented.
Government-wide Statements: The Statement of Net Position and the Statement of Activities display information about the primary government (the Town). These statements include the financial activities of the overall Town government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities, except where interfund services have been received or provided. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. 43 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Basis of Presentation (Continued)
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Town’s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and contributions that are restricted to meeting the operational needs of a particular program and (c) fees, grants and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the Town's funds, including fiduciary funds and blended component units. Separate statements for each fund category—governmental, proprietary, and fiduciary—are presented. The emphasis of fund financial statements is on major individual governmental and enterprise funds, each of which is displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds.
Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as investment earnings, result from nonexchange transactions or ancillary activities.
C. Major Funds
Major funds are defined as funds that have either assets and deferred outflows of resources, liabilities and deferred inflows of resources, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The General Fund is always a major fund. The Town may also select other funds it believes should be presented as major funds.
The Town reported the following major governmental funds in the accompanying financial statements:
General Fund – Accounts for all the general revenues and financial resources of the Town not specifically levied or collected for the other Town funds, as well as the related expenditures.
Special Tax Special Revenue Fund – Accounts for parcel tax assessments received from property owners to be used for the maintenance of streets and drainage, and police services.
The tax assessment is no longer collected. Fiscal year 2017-18 was the last year of collection.
Residual funds remain.
Library Special Revenue Fund – Accounts for property tax funds dedicated to the Town’s library operations.
Facilities Construction Capital Projects Fund – Accounts for the funds dedicated to facilities construction.
Capital Improvement Capital Projects Fund – Accounts for capital improvement construction costs and financing sources.
44 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Major Funds (Continued)
The Town also reports the following fund types:
Internal Service Funds - Accounts for equipment replacement, workers’ compensation insurance, general liability and employee benefits provided to other departments on a cost reimbursement basis.
Fiduciary Funds – Custodial Funds account for assets held by the Town as an agent for Atherton Tree Committee and Holbrook-Palmer Park Foundation. The financial activities of these funds are excluded from the Entity-wide financial statements, but are presented in separate Fiduciary Fund financial statements.
D. Basis of Accounting
The government-wide, proprietary, and fiduciary fund financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The Town considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Governmental capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of governmental long-term debt and acquisitions under capital leases are reported as other financing sources.
Those revenues susceptible to accrual are sales taxes, gas taxes, charges for services, and interest revenue. Fines, licenses and permits are not susceptible to accrual because they are not measurable until received in cash.
Non-exchange transactions, in which the Town gives or receives value without directly receiving or giving equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or assessed.
Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The Town may fund programs with a combination of cost-reimbursement grants, categorical block grants, and general revenues. Thus, both restricted and unrestricted net position may be available to finance program expenditures. The Town’s policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary.
Certain indirect costs are included in program expenses reported for individual functions and activities.
45 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of financial position or balance sheet reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then.
In addition to liabilities, the statement of financial position or balance sheet reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.
F. Property Tax
Revenue is recognized in the period for which the tax and assessment is levied. The County of San Mateo levies, bills and collects property taxes and sewer charges for the Town; the County remits the entire amount levied and handles all delinquencies, retaining interest and penalties. Secured and unsecured property taxes are levied on January 1.
Secured property tax is due in two installments, on November 1 and February 1, and becomes a lien on those dates. It becomes delinquent on December 10 and April 10, respectively. Unsecured property tax is due on January 1 and becomes delinquent on August 31.
The term “unsecured” refers to taxes not secured by real property. These taxes are liens on the person or company named on the tax bill. Property tax revenues are recognized by the Town in the fiscal year they are assessed provided they become available as defined above.
San Mateo County distributes property taxes to jurisdictions according to the “alternate method of property tax distribution” known as the Teeter Plan. Under this plan, the County remits 100% of the levied taxes to the appropriate jurisdictions by June 30 each year, pursuing delinquencies and keeping related late penalties to cover their costs.
46 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G. Compensated Absences
Compensated absences comprise accrued compensated time-off, vacation and holiday pay for all regular employees; vacation and holiday pay for management employees. The Town’s liability for compensated absences is recorded in Governmental Activities. The liability for compensated absences is determined annually. For all governmental funds, amounts expected to be permanently liquidated (matured due to termination) are recorded as fund liabilities; the long-term portion is recorded in the Statement of Net Position.
The changes of the compensated absences during fiscal year 2023 were as follows:
Beginning Balance $966,718
Additions 821,242
Payments (691,587)
Ending Balance $1,096,373
Current Portion $613,272
The Long-term portion of governmental activities compensated absences is liquidated primarily by the Employee Benefits Fund followed by the General Fund.
H. Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
I. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Town categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 inputs are inputs – other than quoted prices included within level 1 – that are observable for an asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for an asset or liability.
If the fair value of an asset or liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement.
47 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) J. OPEB Liabilities, OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Town’s OPEB Plan and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the same basis as they are reported by PARS Trust. For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.
K. Leases
As clarified by the Government Accounting Standards Board (GASB) Statement No. 87, 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. The Town recognizes lease receivables or liabilities with an initial, individual value of $50,000 or more, based on the future lease payments remaining at the start of the lease.
L. Subscription-Based Information Technology Arrangements (SBITAs) Accounting As clarified by the Government Accounting Standards Board (GASB) Statement No. 96, a Subscription-Based Information Technology Arrangement (SBITA) is a contract that conveys control of the right to use another party’s (a SBITA vendor’s) IT software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction.
At the commencement of a SBITA, the Town initially measures the subscription liability at the present value of payments expected to be made during the contract term. Subsequently, the subscription liability is reduced by the principal portion of payments made. The subscription asset is initially measured as the initial amount of the subscription liability, adjusted for payments made at or before the SBITA commencement date, plus certain initial direct costs. Subsequently, the subscription asset is amortized on a straight‐line basis over the shorter of the subscription term or the useful life of the underlying IT assets. The Town recognizes SBITA liabilities with an initial, individual value of $50,000 or more, based on the future SBITA payments remaining at the start of the contract.
Key estimates and judgments related to SBITAs include how the Town determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term, and (3) subscription payments as follows:
• The Town uses the interest rate charged by the IT vendor as the discount rate. When the interest rate charged by the IT vendor is not provided, the Town uses its estimated incremental borrowing rate as the discount rate for subscription liabilities. • The subscription term includes the noncancellable period of the subscription. • Subscription payments included in the measurement of the subscription liability are composed of fixed payments and purchase option price that the Town is reasonably certain to exercise.
48 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) L. Subscription-Based Information Technology Arrangements (SBITAs) Accounting (Continued) The Town monitors changes in circumstances that would require a remeasurement of its subscription and will remeasure the subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the subscription liability.
Subscription assets are reported with other capital assets and subscription liabilities are reported with liabilities on the statement of net position.
M. Implementation of Governmental Accounting Standards Board (GASB) Pronouncements The following Governmental Accounting Standards Board (GASB) pronouncement was effective in fiscal year 2023:
GASB 96 – Subscription-Based Information Technology Arrangements (SBITAs) This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. To the extent relevant, the standards for SBITAs are based on the standards established in Statement No. 87, Leases, as amended.
The requirements of this Statement are effective for reporting periods beginning after June 15, 2022, and all reporting periods thereafter. The Town has no SBITAs subject to GASB#96 for the fiscal year 2023.
NOTE 2 – BUDGETS AND BUDGETARY ACCOUNTING
A. Budgets and Budgetary Accounting
The Town follows these procedures in establishing the budgetary data reflected in the financial statements:
• By June 30, the Town Manager submits to the Town Council a proposed operating and capital budget for the year commencing July 1. The operating and capital budget includes proposed expenditures and the means of financing them. Continuing appropriations are rebudgeted by the Town Council as part of the adoption of the subsequent year’s budget. • Public hearings are conducted to obtain taxpayer comments. • The budget is legally enacted through passage of resolution during a Town Council meeting in the month of June.
49 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 2 – BUDGETS AND BUDGETARY ACCOUNTING (Continued)
A. Budgets and Budgetary Accounting (Continued)
• The Town Manager is authorized to transfer budget appropriations within the same department in conformance with the adopted policies set by the Town Council. All other transfers must be approved by the Town Council. Any revisions that alter the total expenditures of any department must be approved by the Town Council. Expenditures are budgeted at, and may not legally exceed, the department level. Budgeted amounts shown are as originally adopted, or as amended by the Town Council during the year. • Formal budgeting is employed as a management control device during the year for the general and certain special revenue funds.
• Budgets for the general and certain special revenue are adopted on a basis consistent with generally accepted accounting principles (GAAP).
• Budgets for capital projects are adopted on a project-life basis. • The Town does not budget for the Storm Drainage Capital Project Fund.
B. Expenditures in Excess of Budget
The funds below incurred expenditures in excess of their budgets on the departmental level in the amounts below for the year ended June 30, 2023:
Amount
General Fund
City Council ($18)
Nonmajor Special Revenue Funds:
County Measure A
Public Works (16,580)
Gas Tax
Public Works (5,308)
Refuse Rate Stabilization
Public Works (285)
Fund Name
NOTE 3 – CASH AND INVESTMENTS
The Town’s dependence on property tax receipts requires it to maintain significant cash reserves to finance operations during the remainder of the year. The Town receives property tax in November (5%), December (45%), March (5%), April (35%), May (5%) and June (5%). The Town pools cash from all sources and all funds except Cash with Fiscal Agents so that it can be invested at the maximum yield, consistent with safety and liquidity, while individual funds can make expenditures at any time.
50 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 3 – CASH AND INVESTMENTS (Continued)
A. Policies
California Law requires banks and savings and loan institutions to pledge government securities with a market value of 110% of the Town’s cash on deposit or first trust deed mortgage notes with a value of 150% of the Town’s cash on deposit as collateral for these deposits. Under California Law, this collateral is held in an investment pool by an independent financial institution in the Town’s name and places the Town ahead of general creditors of the institution pledging the collateral.
The Town’s investments are carried at fair value, as required by generally accepted accounting principles. The Town adjusts the carrying value of its investments to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in income for that fiscal year. In the Town’s case, fair value equals fair market value, since all of the Town’s investments are readily marketable.
B. Classification
Cash and investments are classified in the financial statements as shown below.
Statement of Net Position
Cash and investments available for operations $36,472,389 Fiduciary Funds
Cash and investments available for operations 33,402
Total Cash and Investments $36,505,791
Cash and investments as of June 30, 2023 consist of the following:
Cash on hand $875
Cash in bank 3,396,276
Investments 33,108,640
Total Cash and Investment $36,505,791
Cash and investments are used in preparing the Proprietary Fund statement of cash flows since those funds participate in the Town-wide cash and investment pool. The fund equity in the pool is in substance a demand deposit which may be drawn down at any time.
51 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 3 – CASH AND INVESTMENTS (Continued)
C. Investments Authorized by the California Government Code and the Town’s Investment Policy The Town’s Investment Policy and the California Government Code allow the Town to invest in the following provided the credit ratings of the issuers are acceptable to the Town; and approved percentages and maturities are not exceeded. The table below also identifies certain provisions of the California Government Code or the Town’s Investment Policy where it is more restrictive:
Authorized Investment Type
Maximum
Maturity
Minimum
Credit Quality
Maximum Percentage
of Portfolio
Maximum Investment
in One Issuer
U.S. Treasury Obligations 5 years N/A No Limit No Limit U.S. Agency Securities 5 years N/A No Limit 25%
Repurchase Agreements 30 days A / A-1 No Limit No Limit Medium-Term Corporate Notes 5 years A 30% 5%
Commercial Paper 270 days A / A-1 25% 5%
State Local Agency Investment Fund N/A N/A 50% $75M per account Money Market Mutual Funds N/A AAAm 20% No Limit
Negotiable and Non-Negotiable
Certificate of Deposits 5 years A-1+ 10% $250,000
D. Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Normally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The Town generally manages its interest rate risk by holding investments to maturity.
Information about the sensitivity of the fair values of the Town’s investments (including investments eld by bond trustees) to market interest rate fluctuations is provided by the following table that shows the distribution of the Town’s investments by maturity or earliest call date:
Investment Type
12 Months
or less
13 to 24
Months
25 to 60
Months Total
U.S. Treasuries $3,219,391 $335,781 $2,261,855 $5,817,027 U.S. Agency Securities 3,964,156 1,414,414 5,378,570
Corporate Notes 3,488,992 1,035,751 4,524,743
California Local Agency Investment Fund 14,888,451 14,888,451 San Mateo County Investment Pool 2,487,040 2,487,040
Money Market Mutual Fund 12,809 12,809
Total Investments $28,060,839 $335,781 $4,712,020 33,108,640 Cash in banks 3,396,276
Petty cash 875
Total Cash 3,397,151
Total Cash and Investments $36,505,791
52 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 3 – CASH AND INVESTMENTS (Continued)
E. Credit Risk
Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization (NRSRO). The Standard and Poor’s investment ratings as of June 30, 2023 are as follows:
Investment Type AAAm AA+/AA/AA- A+/A/A- Not Rated Total U.S. Treasuries $5,817,027 $5,817,027
U.S. Agency Securities 5,378,570 5,378,570
Corporate Notes 585,958 $3,938,785 4,524,743
California Local Agency Investment Fund $14,888,451 14,888,451 San Mateo County Investment Pool 2,487,040 2,487,040
Money Market Mutual Fund $12,809 12,809
Total Investments $12,809 $11,781,555 $3,938,785 $17,375,491 $33,108,640 F. Concentration of Credit Risk
At June 30, 2023, the Town had one investment in the securities of any individual issuer, other than U. S. Treasury securities, mutual funds, and external investment funds, that represented 5% or more of total Entity-wide investments and General Fund investments. The six securities are from the Federal Home Loan Mortgage Association in the amount of $2,904,371.
G. Local Agency Investment Fund
The Town is a participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The Town reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as the value of the pool share. The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF’s investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies, government-sponsored enterprises, United States Treasury Notes and Bills, and corporation. At June 30, 2023, these investments matured in an average of 260 days.
H. San Mateo County Investment Pool
The Town’s investment held under San Mateo Library Donor Trust Fund was invested by the San Mateo Library (Library) in the San Mateo County Investment Fund (SMCIF) that is regulated by California Government Code Section 53600 under the oversight of the treasurer of the County of San Mateo. The Town reports its investment in SMCIF at the fair value amount provided by the Library.
The balance available for withdrawal is based on the accounting records maintained by SMCIF, which are recorded on an amortized cost basis. Included in SMCIF’s investment portfolio are U.S.
Treasury Notes, obligations issued by agencies of the U.S. Government, LAIF, corporate notes, commercial paper, collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, and floating rate securities issued by federal agencies, government-sponsored enterprises, and corporations. The Town reports its investments in SMCIF at the fair value amounts provided by SMCIF, which is the same as the value of the pool share. During fiscal year 2023, SMCIF released the funds to the Town for use towards the construction of the library and the balance is $2,487,040 as of June 30, 2023.
53 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 3 – CASH AND INVESTMENTS (Continued)
I. Fair Value Hierarchy
The Town categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs.
The following is a summary of the fair value hierarchy of the fair value of investments of the Town as of June 30, 2023:
Level 1 Level 2 Total
Investments by Fair Value Level:
U.S. Treasuries $5,817,027 $5,817,027
U.S. Agency Securities $5,378,570 5,378,570
Corporate Notes 4,524,743 4,524,743
Subtotal $5,817,027 $9,903,313 15,720,340
Investments Measured at Amortized Cost:
Money Market Mutual Funds 12,809
Investments Exempt from Fair Value Hierarchy
California Local Agency Investment Fund 14,888,451
San Mateo County Investment Pool 2,487,040
Total Investments $33,108,640
Investment Type
U.S. Treasury Notes, classified in Level 1 of the fair value hierarchy, are valued using quoted prices in active markets. U.S. Agency Securities and Corporate Notes, classified in Level 2 of the fair value hierarchy, are valued using quoted prices for a non-active market portfolio at fiscal year-end.
These prices are obtained from various pricing sources by our custodian bank. Fair value is defined as the quoted market value on the last trading day of the period. Money market funds were reported at amortized cost.
54 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 4 – INTERFUND TRANSACTIONS
A. Transfers Between Funds
With Town Council approval, resources may be transferred from one Town fund to another. The purpose of the majority of transfers is to reimburse a fund, which has made an expenditure on behalf of another fund. Less often, a transfer may be made to open or close a fund.
Transfers between funds during the fiscal year ended June 30, 2023 were as follows:
Amount
Fund Receiving Transfer Fund Making Transfer Transferred Library Special Revenue Fund General Fund $548,854 (A)
Facilities Construction Capital Projects Fund General Fund 640,183 (A) Library Special Revenue Fund 800,918 (A)
Capital Improvement Capital Projects Fund General Fund 3,340,000 (A) $5,329,955
(A) Transfer used to fund capital projects
NOTE 5 – CAPITAL ASSETS
All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Contributed capital assets are valued at their estimated acquisition value on the date contributed.
The Town has recorded all its public domain (infrastructure) capital assets, which include streets and roads, curbs and gutters, traffic control devices, drainage systems and street lighting systems.
All capital assets with limited useful lives are depreciated over their estimated useful lives. The purpose of depreciation is to spread the cost of capital assets equitably over the life of these assets. The amount charged to depreciation expense each year represents that year’s pro rata share of the cost of capital assets.
The Town has set the capitalization threshold at $5,000 for capital assets, except for infrastructure at $100,000, and a half year of depreciation is recorded in the year of acquisition. Depreciation is provided using the straight line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated. The Town has assigned the useful lives listed below to capital assets:
Buildings 40 years
Other improvements 20 years
Computer Equipment and Software 3 years
Furniture and fixtures 10 years
Vehicles 5 to 10 years
Machinery and Equipment 5 to 20 years
Infrastructure 20 to 50 years
Major outlays for capital assets and improvements are capitalized as projects are constructed. 55 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 5 – CAPITAL ASSETS (Continued)
A. Current Year Capital Asset Activities
Balance Balance
Governmental Funds July 1, 2022 Additions Retirement Transfers June 30, 2023 Capital assets not being depreciated:
Land $690,884 $690,884
Construction in progress 65,224,734 $1,961,358 ($65,837,694) 1,348,398 Total non-depreciable capital assets 65,915,618 1,961,358 (65,837,694) 2,039,282 Capital assets being depreciated:
Buildings 818,762 ($14,373) 64,864,088 65,668,477
Other improvements 1,125,668 1,125,668
Computer equipment and software 338,597 384,769 723,366 Furniture and fixtures 34,798 458,795 493,593
Vehicles 23,434 23,434
Machinery and equipment 439,081 130,042 569,123
Infrastructure 62,992,555 62,992,555
Total depreciable capital assets 65,772,895 (14,373) 65,837,694 131,596,216 Less accumulated depreciation for:
Buildings 699,368 828,865 (14,373) 1,513,860
Other improvements 958,546 27,487 986,033
Computer equipment and software 338,597 19,238 357,835
Furniture and fixture 34,798 22,940 57,738
Vehicles 23,434 23,434
Machinery and equipment 405,583 12,390 417,973
Infrastructure 44,026,256 1,309,600 45,335,856
Total accumulated depreciation 46,486,582 2,220,520 (14,373) 48,692,729 Depreciable capital assets, net 19,286,313 (2,220,520) 65,837,694 82,903,487 General capital assets, net 85,201,931 (259,162) 84,942,769 Internal Service Funds
Depreciable capital assets:
Vehicles 1,269,160 140,108 1,409,268
Computer equipment 327,621 327,621
Other equipment 124,177 124,177
Total depreciable capital assets 1,720,958 140,108 1,861,066 Less: accumulated depreciation for
Vehicles 902,811 148,782 1,051,593
Computer equipment 323,442 4,178 327,620
Other equipment 120,829 3,347 124,176
Total accumulated depreciation 1,347,082 156,307 1,503,389 Internal Service Funds capital assets, net 373,876 (16,199) 357,677 Total governmental activities capital assets, net $85,575,807 ($275,361) $85,300,446
56 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 5 – CAPITAL ASSETS (Continued)
B. Capital Asset Contributions
Some capital assets may be acquired using federal and State grant funds, or they may be contributed by developers or other governments. These contributions are accounted for as revenues at the time the capital assets are contributed.
C. Depreciation Allocation
Depreciation expense is charged to functions and programs based on their usage of the related assets. The amounts allocated to each function or programs are as follows:
Public works $2,200,144
Police 19,868
Building 508
Governmental activities subtotal 2,220,520
Internal Service Fund 156,307
Total $2,376,827
NOTE 6 – FUND BALANCES AND NET POSITION
A. Net Position
Net Position is the excess of all the Town’s assets and deferred outflows over all its liabilities and deferred inflows, regardless of fund. Net Position is divided into three captions. These captions apply only to Net Position, which is determined only at the Government-wide level, and are described below:
Net Investment in Capital Assets describes the portion of Net Position which is represented by the current net book value of the Town’s capital assets, less the outstanding balance of any debt issued to finance these assets.
Restricted describes the portion of Net Position which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which the Town cannot unilaterally alter. These principally include developer fees received for use on capital projects, debt service requirements, and Federal and State grant funds.
Unrestricted describes the portion of Net Position which is not restricted to use.
57 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 6 – FUND BALANCES AND NET POSITIONS (Continued)
B. Fund Balances
Governmental fund balances represent the net current assets of each fund. Net current assets generally represent a fund’s cash and receivables, less its liabilities.
The Town’s fund balances are classified based on spending constraints imposed on the use of resources. For programs with multiple funding sources, the Town prioritizes and expends funds in the following order: Restricted, Committed, Assigned, and Unassigned. Each category in the following hierarchy is ranked according to the degree of spending constraint:
Nonspendables represents balances set aside to indicate items do not represent available, spendable resources even though they are a component of assets. Fund balances required to be maintained intact, such as permanent funds, and assets not expected to be converted to cash, such as prepaids, notes receivable, and land held for redevelopment, are included. However, if proceeds realized from the sale or collection of nonspendable assets are restricted, committed or assigned, then nonspendable amounts are required to be presented as a component of the applicable category.
Restricted fund balances have external restrictions imposed by creditors, grantors, contributors, laws, regulations, or enabling legislation, which require the resources to be used only for a specific purpose. Nonspendable amounts subject to restrictions are included along with spendable resources.
Committed fund balances have constraints imposed by formal action of the Town Council, which may be altered only by formal action of the Town Council. Nonspendable amounts subject to Council commitments are included along with spendable resources.
Assigned fund balances are amounts constrained by the Town’s intent to be used for a specific purpose, but are neither restricted nor committed. Intent is expressed by the Town Council or its designee and may be changed at the discretion of the Town Council or its designee. This category includes nonspendables, when it is the Town’s intent to use proceeds or collections for a specific purpose, and residual fund balances, if any, of Special Revenue, Capital Projects and Debt Service Funds that have not been restricted or committed.
Unassigned fund balance represents residual amounts that have not been restricted, committed, or assigned. This includes the residual general fund balance and residual fund deficits, if any, of other governmental funds.
58 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 6 – FUND BALANCES AND NET POSITIONS (Continued)
B. Fund Balances (Continued)
Detailed classifications of the Town’s Fund Balances, as of June 30, 2023, are below:
Major Major
Special Revenue Funds Capital Projects Funds Other
General Facilities Capital Governmental
Fund Special Tax Library Construction Improvement Funds Total Nonspendable:
Prepaids $46,093 $46,093
Total Nonspendable 46,093 46,093
Restricted for:
Street drainage and police services $550,119 550,119
Library operations $2,486,142 2,486,142
Measure A $1,289,407 1,289,407
Gas tax 350,814 350,814
Measure W 670,662 670,662
Measure M 214,049 214,049
Refuse Services 560,959 560,959
Supplemental Law Enforcement Services 185 185
Channel Drainage District 940,360 940,360
Total Restricted 550,119 2,486,142 4,026,436 7,062,697
Committed to:
Emergency disaster 2,670,000 2,670,000
Total Committed 2,670,000 2,670,000
Assigned to:
Tennis program 126,357 126,357
Tree committee 20,015 20,015
Capital projects $285,768 $4,565,202 32,723 4,883,693
Total Assigned 146,372 285,768 4,565,202 32,723 5,030,065 Unassigned 11,055,528 11,055,528
Total Unassigned 11,055,528 11,055,528
Total Fund Balances $13,917,993 $550,119 $2,486,142 $285,768 $4,565,202 $4,059,159 $25,864,383 C. General Fund Committed Fund Balance for Emergency Disaster The Town Council has committed to set aside 15 percent of the actual annual General Fund operating expenditures specifically for emergency contingencies defined as a state of Federal and/or State emergency or declaration of a local emergency as defined in Atherton’s Municipal Code Section 2.44.010.
D. General Fund Unassigned Fund Balance Policy
The Town Council established the General Fund unassigned fund balance policy such that in no circumstances shall the total General Fund unassigned fund balance be less than 20% of the actual annual operating expenditures.
59 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 7 – PENSION PLAN
A. General Information about the Pension Plan
For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Plan and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by the CalPERS Financial Office. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.
Plan Description – All qualified permanent and probationary employees are eligible to participate in the Town’s separate Safety and Miscellaneous (all other) Employee Pension Rate Plans. The Town’s Safety and Miscellaneous Plans are part of the public agency cost-sharing multiple-employer defined benefit pension plan (PERF C), which is administered by CalPERS. PERF C consists of a miscellaneous pool and a safety pool (also referred to as “risk pools”), which are comprised of individual employer miscellaneous and safety rate plans, respectively. Individual employers may sponsor more than one miscellaneous and safety rate plan. The employer participates in one cost-sharing multiple-employer defined benefit pension plan regardless of the number of rate plans the employer sponsors. Benefit provisions under the Plan are established by State statute and Town resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.
Benefits Provided – CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service.
The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement
Town’s labor contracts (MOU) require the Town to pay the employees’ contributions as well as employer’s portion, except for the sworn officers, who are responsible for 2% of 9% after the Town makes a 7% contribution for them. However, as of July 1, 2013, Miscellaneous Plan employees started to pay their own portion of the required employee contribution rate of 7%. The Town and the Atherton Police Officers Association (APOA) adopted a new MOU on October 1, 2013. Effective on January 1, 2014, the Town’s payment of the employee share of the mandatory member contribution for the CalPERS retirement benefit shall be 5%. Effective January 1, 2015, the Town’s payment of the employee share of the mandatory member contribution shall be reduced to 2.5%. Effective January 1, 2016, the Town shall cease paying any portion of the employees’ share and the employees shall pay 100% of the employee share of the mandatory member contribution, presently 9% for sworn and 7% for civilian.
60 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 7 – PENSION PLAN (Continued)
A. General Information about the Pension Plan (Continued) During the fiscal year 2018-2019, the Town adopted amendments with CalPERS that allows sharing of additional employer costs passed to the employees. The Town implemented a cost sharing within the pension plans among Public Safety and Local Miscellaneous employees. This included Public Safety sworn staff picking up the employers CalPERS share of 3% and 1% for Miscellaneous employees. These are the maximum under CalPERS law for the passing on of costs of the employer’s share. These were amendment changes to the contract between the Board of Administration California Public Employees’ Retirement System and The Town as proposed changes in Section 20516 (Employees Sharing Additional Costs). Increase in employee contribution rates results in a respective decrease in employer contribution rates. The Plan’s provisions and benefits in effect at June 30, 2023, are summarized as follows:
Miscellaneous
Hire date
Prior to
January 1, 2013
On or after
January 1, 2013
Benefit formula 2% @ 55 2% @ 62
Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life
Retirement age 50-67 or older 52-67 or older
Monthly benefits, as a % of eligible compensation 1.426% to 2.418% 1% to 2.5% Required employee contribution rates 7.00% 7.25%
Required employer contribution rates 11.06% 7.76%
Safety
Hire date
Prior to
January 1, 2013
On or after
January 1, 2013
Benefit formula 3% @ 50 2.7% @ 57
Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life
Retirement age 50-55 or older 50-57 or older
Monthly benefits, as a % of eligible compensation 3% 2% to 2.7% Required employee contribution rates 9% 13.75%
Required employer contribution rates 25.64% 13.66%
Beginning in fiscal year 2016, CalPERS collects employer contributions for the cost-sharing plan as a percentage of payroll for the normal cost portion as noted in the rates above and as a dollar amount for contributions toward the unfunded liability and side fund. The dollar amounts are billed on a monthly basis. The Town’s required contribution for the unfunded liability was $1,268,243 in fiscal year 2023.
61 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 7 – PENSION PLAN (Continued)
A. General Information about the Pension Plan (Continued) Contributions – Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for the Plan are determined annually on an actuarial basis as of June 30 by CalPERS.
The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The Town is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions.
For the year ended June 30, 2023, the contributions to the Plan were as follows:
Miscellaneous
Miscellaneous
PEPRA Safety
Safety
PEPRA
Contributions - employer $579,764 $87,481 $1,056,584 $273,931 Contributions - employee 106,569 98,324 134,407 354,083 B. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
As of June 30, 2023, the Town reported a net pension liability for its proportionate share of the net pension liability of the Plan as follows:
Proportionate Share
of Net Pension Liability
Miscellaneous - Classic & PEPRA $6,365,417
Safety - Classic & PEPRA 11,503,411
Total Net Pension Liability $17,868,828
The Town’s net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plan is measured as of June 30, 2022, and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 using standard update procedures. The Town’s proportion of the net pension liability was based on a projection of the Town’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. The Town’s proportionate shares of the net pension liability for the Plan as of June 30, 2021 and 2022 were as follows:
Miscellaneous Safety
Proportion - June 30, 2021 0.17367% 0.25479%
Proportion - June 30, 2022 0.13604% 0.16741%
Change - Increase (Decrease) -0.03763% -0.08738%
62 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 7 – PENSION PLAN (Continued)
B. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
For the year ended June 30, 2023, the Town recognized pension expense of $1,815,212. At June 30, 2023, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Miscellaneous - Classic & PEPRA
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions subsequent to measurement date $667,245 Differences between actual and expected experience 127,830 ($85,615) Changes in assumptions 652,270
Change in employer's proportion and differences between the employer’s contributions and the employer’s
proportionate share of contributions 32,945 (66,210)
Change in employer proportion (205,238)
Net differences between projected and actual earnings
on plan investments 1,165,975
Total $2,646,265 ($357,063)
Safety - Classic & PEPRA
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions subsequent to measurement date $1,330,515 Differences between actual and expected experience 476,084 ($124,918) Changes in assumptions 1,159,892
Change in employer's proportion and differences between the employer’s contributions and the employer’s
proportionate share of contributions 3,048,986 (249,567) Change in employer proportion (3,888,474)
Net differences between projected and actual earnings
on plan investments 1,816,549
Total $7,832,026 ($4,262,959)
Grand total $10,478,291 ($4,620,022)
63 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 7 – PENSION PLAN (Continued)
B. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
$1,997,760 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2023. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:
Miscellaneous Safety Total
Fiscal Year Ended Amortization Amortization Amortization June 30 Amount Amount Amount
2024 $400,663 $658,244 $1,058,907
2025 329,983 443,262 773,245
2026 178,161 196,529 374,690
2027 713,150 940,517 1,653,667
$1,621,957 $2,238,552 $3,860,509
Actuarial Assumptions – The total pension liabilities in the June 30, 2021 actuarial valuations were determined using the following actuarial assumptions:
Valuation Date June 30, 2021
Measurement Date June 30, 2022
Actuarial Cost Method Entry Age Actuarial Cost Method
Actuarial Assumptions:
Discount Rate 6.90%
Inflation 2.30%
Payroll Growth 2.80%
Projected Salary Increase Varies by Entry Age, Service, and type of employment Investment Rate of Return 6.90% (1)
Mortality Derived using CalPERS Membership Data for all Funds (2) (1) Net of pension plan investment expenses, including inflation (2) The mortality table used was developed based on CalPERS' specific data. The table includes generational mortality improvements using Society of Actuaries Scale 80% of Scale MP 2020. For more details on this table, please refer to the November 2021 experience study report (based on CalPERS demographic data from 2001 to 2019) that can be found on the CalPERS website.
The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2021 valuation were based on the results of a November 2021 actuarial experience study for the period 2001 to 2019. Further details of the Experience Study can be found on the CalPERS website.
64 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 7 – PENSION PLAN (Continued)
B. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Discount Rate – The discount rate used to measure the total pension liability for the Plan was
6.90%. The projection of cash flows used to determine the discount rate for the Plan assumed that contributions from all plan members in the Public Employees Retirement Fund (PERF) will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations. Using historical for all the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 basis points.
The table below reflects the expected real rates of return by asset class.
For Miscellaneous and Safety Plan
Asset Class (a)
Assumed Asset
Allocation
Real Return
(a, b)
Global Equity - Cap-weighted 30.0% 4.54%
Global Equity - Non-Cap-weighted 12.0% 3.84%
Private Equity 13.0% 7.28%
Treasury 5.0% 0.27%
Mortgage-backed Securities 5.0% 0.50%
Investment Grade Corporates 10.0% 1.56%
High Yield 5.0% 2.27%
Emerging Market Debt 5.0% 2.48%
Private Debt 5.0% 3.57%
Real Assets 15.0% 3.21%
Leverage -5.0% 0.59%
Total 100%
(a) An expected inflation of 2.30% used for this period. (b) Figures are based on the 2021 Asset Liability Management study. 65 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 7 – PENSION PLAN (Continued)
B. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate – The following presents the Town’s proportionate share of the net pension liability for the Plan, calculated using the discount rate for the Plan, as well as what the Town’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:
Miscellaneous Safety
1% Decrease 5.90% 5.90%
Net Pension Liability $9,419,835 $18,962,100
Current Discount Rate 6.90% 6.90%
Net Pension Liability $6,365,417 $11,503,411
1% Increase 7.90% 7.90%
Net Pension Liability $3,852,388 $5,407,617
Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.
NOTE 8 – POST EMPLOYMENT HEALTH CARE BENEFITS
A. General Information about the Town’s Other Post Employment Benefit (OPEB) Plan and the OPEB Trust Fund
OPEB Trust Plan Administrator – The City Manager is the Town’s appointed plan administrator to act on behalf of the Town. The Public Agency Retirement Services (PARS) administers the trust for the Town’s retiree healthcare benefit plan.
Plan Description – The Town’s Post Employment Benefit Plan is an agent multiple-employer defined benefit OPEB plan. By Town Council resolution, the Town provides certain medical benefits for employees and dependents who retire directly from the Town at fifty years or older and who are vested in the California Public Employees Retirement System (CalPERS).
Benefits Provided – The Town of Atherton participates in the CalPERS medical program. Retirees who qualify for a CalPERS pension are entitled to employer paid CalPERS medical benefits as described below. The Town does not pay for dental, vision or other health and welfare benefits for retirees.
Employees who retire from the Town, receive a PERS pension and continue their CalPERS medical coverage are eligible to receive the benefit described below. This benefit continues throughout the life of the retiree and surviving spouse.
Management Employees (non-represented), hired before adoption of Management Resolution on November 17, 2010 - The Town pays 100% of premiums for any medical coverage and any family status.
66 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 8 – POSTEMPLOYMENT HEALTH CARE BENEFITS (Continued) A. General Information about the Town’s Other Post Employment Benefit (OPEB) Plan and the OPEB Trust Fund (Continued)
Management Employees (non-represented), hired after adoption of November 17, 2010 and before June 30, 2013 - The Town pays up to a maximum of the single employee Kaiser premium regardless of family status. A spouse or dependent is only covered if the employee's premium is less than this maximum. After age 65, the Town pays up to a maximum of the reduced post age 65 single employee Kaiser premium.
Employees retiring from the Town and CalPERS concurrently with at least 5 years of service will receive the basic Public Employees Medical and Hospital Care Act (PEMHCA) minimum contribution by law.
Management Employees (non-represented), hired on or after July 1, 2013 - The Town pays the CalPERS minimum benefit.
APOA Police Officers, retired before October 1, 2013 - The Town pays a maximum monthly benefit of $1,247.06 which is assumed to not increase in the future. APOA employees retiring on disability from employment of the Town while in a job classification covered by this MOU and said disability arising from employment with the Town, shall be exempt from this cap.
Members of the APOA Police Officers, hired before October 1, 2013 but retired or will retire after October 1, 2013 – The Town pays up to a maximum of 90% of the Kaiser premium for any family status. This cap is assumed to increase at half the excess of the assumed rate of increase over 3% each year, with a minimum of 0%. This assumption is based on the language in Resolution 13-37, page 8, Paragraph C. a., and assumes that the same language will continue in years after 2016.
Employees retiring from the Town and CalPERS concurrently with at least 5 years of service will receive the basic Public Employees Medical and Hospital Care Act (PEMHCA) minimum contribution by law. If they have 10 or more years of service, they are subject to a vesting schedule.
APOA employees retiring on disability from employment of the Town while in a job classification covered by this MOU and said disability arising from employment with the Town, shall receive 90% of the Town contribution of Kaiser.
APOA Police Officers, hired on or after October 1, 2013 – The Town pays up to a maximum of the PEMHCA Minimum ($151 in 2023, $157 in 2024).
APOA Miscellaneous Employees – The Town pays the same benefit as for APOA Officers. It has been assumed that this benefit will continue after 2016.
Teamsters and Confidential employees – (non-management, miscellaneous) hired before January 19, 2011 - The Town pays up to a maximum benefit of 95% of Blue Shield Access Plus basic/supplemental Bay Area/Sacramento HMO premiums. This applies to any medical coverage and any family status. After age 65, the Town pays only 95% of the reduced post age 65 premiums.
67 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 8 – POSTEMPLOYMENT HEALTH CARE BENEFITS (Continued) A. General Information about the Town’s Other Post Employment Benefit (OPEB) Plan and the OPEB Trust Fund (Continued)
Employees Covered by Benefit Terms – Membership in the plan consisted of the following at the measurement date of June 30, 2023:
Active employees 39
Retirees receiving benefit payments 41
Total 80
To comply with Actuarial Standard of Practice No. 6 (ASOP 6), the actuarial valuation includes an implicit subsidy liability. When premiums for retirees are determined using a blend of active employee and retiree experience, it creates an implicit subsidy to the retirees, since retiree healthcare costs are generally higher than active employees. ASOP 6 effectively requires most public agencies to calculate an implicit subsidy liability whenever their retirees participate in the group medical plans, but only pay the same premiums as active employees.
As a result of the required ASOP 6, the Town’s Actuarial Accrued Liability at June 30, 2023 included an implicit subsidy liability of $1,087,994.
B. Net OPEB Liability (Asset)
Actuarial Methods and Assumptions – The Town’s net OPEB liability and total OPEB liability were determined by an actuarial valuation based on the following dates, actuarial methods and assumptions:
Actuarial Assumptions • June 30, 2023 Measurement Date
Valuation Date • June 30, 2022
Actuarial Cost Method • Entry Age Normal
Contribution Policy • The Town intends to contribute the full ADC to the PARS trust each year Inflation • 2.50% per annum
Payroll Increases • 2.80% annual increases
Medical Trend • Pre-65: 6.50% for 2023
• Post-65: 5.40% in 2023 decreasing to an ultimate rate of 3.94% by 2075 Mortality • CalPERS 2020 Scale MP-2020
Discount Rate and Long Term
Expected Rate of Return on
Investment
• 6.00%, based on PARS investment allocation Moderate
68 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 8 – POSTEMPLOYMENT HEALTH CARE BENEFITS (Continued) B. Net OPEB Liability (Asset) (Continued)
OPEB Trust Investment Policy - PARS offers different investment portfolios as part of the investment vehicle. The Town has elected to invest pre-funded contributions using a Moderate Index Plus portfolio. The investment objective of this strategy is to provide current income and moderate capital appreciation.
The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:
Long-Term
Target Expected Real
Asset Class Allocation Rate of Return
Equity 48.25% 4.37%
Fixed income 45.00% 1.10%
REITS 1.75% 3.54%
Cash 5.00% -0.45%
Total 100.00%
The expected long-term real rate of return of the OPEB Trust is 6.00% as of June 30, 2023. This rate of return was determined using a building-block method in which best-estimate ranges of expected future real rates of return net of investment expense are developed for each major asset class.
The above table shows the target asset allocation in the PARS Trust Moderate investment policy.
Discount Rate – The discount rate is based on a blend of (a) the long-term expected rate of return on assets for benefits covered by plan assets and a yield or index for 20-year, tax-exempt general obligation municipal bonds with an average rating of AA/Aa or better for benefits not covered by plan assets. The projection of cash flows used to determine the discount rate assumed that Town contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.
OPEB Trust Annual Money-Weighted Rate of Return – For the year ended June 30, 2023, the annual money-weighted rate of return on investments, net of investment expense, was (6.20%). The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. 69 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 8 – POSTEMPLOYMENT HEALTH CARE BENEFITS (Continued) C. Changes in Net OPEB Liability (Asset)
The changes in the net OPEB liability follows:
Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability/(Asset)
(a) (b) (a) - (b)
Balance at June 30, 2022 Measurement Date $7,736,578 $7,829,922 ($93,344) Changes Recognized for the Measurement Period:
Service Cost 105,341 105,341
Interest on the total OPEB liability 451,942 451,942
Changes in benefit terms
Differences between expected and actual experience 224,199 224,199 Changes of assumptions
Net investment income 532,619 (532,619)
Contributions
Employer - Town's contribution 626,765 (626,765)
Employer - implicit subsidy
Benefit payments (628,249) (628,249)
Implicit subsidy credit
Administrative expenses (44,314) 44,314
Net changes 153,233 486,821 (333,588)
Balance at June 30, 2023 Measurement Date $7,889,811 $8,316,743 ($426,932) Plan fiduciary net position as a percentage of the total OPEB liability 105.4% The OPEB plan does not issue separate financial statements.
D. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate and Healthcare Cost Trend Rates
The following presents the net OPEB liability of the Town, as well as what the Town's net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current discount rate:
Net OPEB Liability (Asset)
Discount Rate -1% Current Discount Rate Discount Rate +1% (5.00%) (6.00%) (7.00%)
$464,389 ($426,932) $1,170,708
The following presents the net OPEB liability of the Town, as well as what the Town's net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates as discussed above:
Net OPEB Liability (Asset)
Current Healthcare Cost
1% Decrease Trend Rates 1% Increase
($1,234,407) ($426,932) $524,092
70 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 8 – POSTEMPLOYMENT HEALTH CARE BENEFITS (Continued) E. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2023, the Town recognized OPEB expense of $1,398,519. At June 30, 2023, the Town reported deferred outflows and inflows of resources related to OPEB from the following sources:
Deferred Outflows Deferred Inflows
of Resources of Resources
Differences between actual and expected experience $421,259 ($952,278) Changes of assumptions (1,553,279)
Net differences between projected and actual earnings on plan investments 431,471
Total $852,730 ($2,505,557)
The deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in future fiscal years as part of OPEB expense as follows:
Year
Ended June 30 Amortization
2024 ($897,431)
2025 (630,122)
2026 (187,171)
2027 24,533
2028 37,364
Total ($1,652,827)
NOTE 9 – RISK MANAGEMENT
A. Coverage
The Town is a member of Pooled Liability Assurance Network (PLAN), which provides general liability coverage of $5,000,000 above the Town’s deductible of $25,000 per occurrence, risk property insurance of $500,000 above the Town’s deductible of $5,000 for property damage and $5,000 for auto / vehicle damage. PLAN is governed by a board consisting of representatives from member municipalities. The board controls the operations of PLAN, including selection of management and approval of operating budgets, independent of any influence by member municipalities beyond their representation on the Board.
Audited financial statements may be obtained from PLAN Services, 1750 Creekside Oaks Drive, Suite 200, Sacramento, CA 95833.
71 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 9 – RISK MANAGEMENT (Continued)
A. Coverage (Continued)
Alliant Insurance Services covers employment theft up to $2,000,000 for each claim and in the aggregate and the Town’s deductible is $10,000 per claim.
The Cities Group covers workers’ compensation claims up to $1,000,000 each for miscellaneous employees, up to $1,500,000 each for safety officers, and has coverage above that limit to a maximum of $10,000,000. The Town has no deductible for the claims.
Audited financial statements may be obtained from Cities Group, address, P.O. Box 111, Burlingame, CA 94011-0111.
B. Uninsured Claims
The Town’s liability for uninsured claims, including estimated claims incurred but not reported, was estimated by management based on prior years claims experience and was computed as follows as of June 30:
2023 2022
Beginning balance $100,000 $66,426
Net change in claims liabilities (948) 85,260
Claims paid (36,462) (51,686)
Ending balance $62,590 $100,000
Claims liabilities due within a year $62,590 $100,000
For the years ended June 30, 2023, 2022, and 2021 the amount of settlements did not exceed insurance coverage.
NOTE 10 – LONG TERM LIABILITIES
The Town generally incurs long‐term debt to finance projects or purchase assets, which will have useful lives equal to or greater than the related debt. This debt will be repaid only out of governmental funds but is not accounted for in these funds because this debt does not require an appropriation or expenditure in this accounting period.
The City’s debt issues and transactions are summarized below and discussed in detail thereafter.
A. Current Year Transactions and Balances
Balance at Balance at Due Within Due in More
June 30, 2022 Retirements June 30, 2023 One Year Than One Year Direct borrowings:
San Mateo County Bayfront Canal Loan $1,442,759 ($313,416) $1,129,343 $313,612 $815,731 Town Center Project Capital Lease 6,288,272 (727,473) 5,560,799 743,566 4,817,233 Total $7,731,031 ($1,040,889) $6,690,142 $1,057,178 $5,632,964 72 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 10 – LONG TERM LIABILITIES (Continued)
B. San Mateo County Bayfront Canal Loan (Direct Borrowing) The Town of Atherton entered into a $165,000 loan agreement for the Bayfront Canal and Atherton Channel Collaborative Memorandum of Understanding between the City of Redwood City, City of Menlo Park, Town of Atherton, and the County of San Mateo.
San Mateo County Resolution Number 075608 adopted on December 5, 2017, authorized the president of the Board of Supervisors to execute a loan agreement between the Town of Atherton and the County that provides a $165,000 loan to the Town of Atherton for the planning design, and environmental permitting for the Bayfront Canal and Atherton Channel Flood Management and Restoration Project. This amount is the proportionate share of the costs of planning, design, and environmental permitting services for the Bayfront Canal and Atherton Channel Flood Management and Restoration Project. The loan in the amount of $165,000 is to finance the Town's obligation pursuant to the MOU, with said loan being repaid over a ten (10) year period.
On December 9, 2022 the Town of Atherton entered into a sublease with the County of San Mateo for the construction of the Bayfront Canal Restoration Project related to the San Mateo County Intra-County Lease Agreement. The County loaned the Town of Atherton $1,350,000 for the Town’s portion of the construction costs of the Bayfront Canal Project. The loan is to be repaid over a five (5) year period through reduction of Atherton property taxes remittance from the County for a fix amount of $148,500 on April 15 and December 15 annually. As of June 30, 2023, the outstanding amount on the loan is $1,129,343.
C. Town Center Project Capital Lease Agreement (Direct Borrowing) On June 1, 2020, the Town entered into Lease Agreements with the Public Property Financing Corporation of California, which subsequently assigned the Agreement to Capital One Public Funding LLC (Assignee), under which the Town leased certain land and improvements initially consisting generally of the Holbrook-Palmer Park and the land on which the Town Center Project will be located, for which the Assignee made a one‐time up‐front lease payment to the Town in the amount of $7,680,000.
Simultaneously, the Town will lease back from the Assignee with annual lease payments over a lease term of 10 years, at a fixed interest rate of 2.20% per year. The Sublease is secured by the leased property. The Sublease is repayable in semi‐annual payments beginning December 1, 2020 through June 1, 2030. The pledge of repayment is from the General Fund.
73 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 10 – LONG TERM LIABILITIES (Continued)
D. Debt Services Requirements
Annual debt service requirements are shown below for all long‐term debt with specified repayment terms:
San Mateo County Town Center Project
Year ending June 30 Principal Interest Principal Interest Total 2024 $313,612 $885 $743,566 $118,305 $1,176,368
2025 313,815 683 760,015 101,856 1,176,369
2026 314,016 482 776,828 85,044 1,176,370
2027 179,221 277 794,012 67,859 1,041,369
2028 8,679 71 811,577 50,294 870,621
2029 - 2030 1,674,801 46,331 1,721,132
Total $1,129,343 $2,398 $5,560,799 $469,689 $7,162,229
Bayfront Canal Loan Capital Lease
NOTE 11 – JOINT POWERS AUTHORITIES
The Town participates in joint ventures discussed below through separate entities established under the Joint Exercise of Powers Act of the State of California. As separate legal entities, these entities exercise full powers and authorities within the scope of the related Joint Powers Agreements including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued.
Each joint venture is governed by a board consisting of representatives from member municipalities. Each board controls the operations of the respective joint venture, including selection of management and approval of operating budgets, independent of any influence by member municipalities beyond their representation on that board. Obligations and liabilities of these joint ventures are not the Town's responsibility and the Town does not have an equity interest in the assets of each joint venture except upon dissolution of the joint venture.
The Joint Powers Agreement is effective for the year ended June 30, 2018 and continues on a year to year basis until the parties agree to terminate the agreement or if a majority of the parties have withdrawn from the Joint Powers pursuant to Section 6 of the agreement.
A. Town/County Association of Governments of San Mateo County (C/CAG) Town/County Association of Governments of San Mateo County was formed in 1990 between the various cities in San Mateo County to prepare, adopt, monitor and enforce state mandated plans for the management of traffic congestion, integrated solid waste, airport land use and hazardous waste.
The Town’s contribution to C/CAG was $23,072 for the year ended June 30, 2023. Financial statements may be obtained by mailing a request to the City of San Carlos, 600 Elm Street, San Carlos, CA 94070.
B. Alcohol Violation Temporary Housing Authority (AVTHA) AVTHA was established between the County and most of the cities and towns in the County to provide temporary housing and counseling to persons accused of alcohol related law violations.
AVTHA contracts with an operator to provide such services. The costs of operating the temporary housing are allocated to each member based on alcohol related arrests occurring within each member’s jurisdiction. Financial statements for AVTHA may be obtained by mailing a request to Redwood City, 801 Marshall Street, Suite 600, Redwood City, California 94063. 74 TOWN OF ATHERTON
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 11 – JOINT POWERS AUTHORITIES (Continued)
C. Library Joint Powers Agreement (JPA)
In 1999, the Town joined with the County and ten other municipalities in the County to coordinate and expand library services throughout the County, including those in the Town.
Property tax revenues in excess of the JPA’s costs of maintaining the library are remitted to the Town and are deposited into the Library Special Revenue Fund. Expenditures of this fund are subject to the approval of the Library JPA.
NOTE 12 – CONTINGENT LIABILITIES
The Town is subject to litigation arising in the normal course of business. In the opinion of the Town Attorney there is no pending litigation that is likely to have a material adverse effect on the financial position of the Town.
The Town participates in Federal and State grant programs. When required, these programs are audited in accordance with the provisions of the Federal Single Audit Act, as amended and applicable State requirements. These programs are also subjected to further examination by the grantors, and the amount, if any, of expenditures that may be disallowed by the granting agencies, cannot be determined at this time. The Town expects such amounts, if any, to be immaterial.
75 This Page Left Intentionally Blank
REQUIRED SUPPLEMENTARY INFORMATION
REQUIRED SUPPLEMENTARY INFORMATION
COST-SHARING MULTIPLE-EMPLOYER DEFINED PENSION PLAN – LAST 10 YEARS* SCHEDULE OF PLAN’S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY Miscellaneous
Measurement Date 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 Plan's proportion of the Net Pension
Liability (Asset) 0.04366% 0.10574% 0.11181% 0.11522% 0.11852% 0.12379% 0.12799% 0.17367% 0.13604% Plan's proportion share of the
Net Pension Liability (Asset) $2,716,530 $2,901,033 $3,884,053 $4,542,046 $4,466,539 $4,957,053 $5,398,568 $3,297,589 $6,365,417 Plan's Covered Payroll $1,473,083 $1,595,884 $1,772,771 $1,912,587 $2,040,240 $2,127,834 $2,314,721 $2,320,927 $4,610,367 Plan's Proportionate Share of the Net Pension
Liability/(Asset) as a Percentage of its
Covered Payroll 184.41% 181.78% 219.10% 237.48% 218.92% 232.96% 233.23% 142.08% 138.07% Plan’s Fiduciary Net Position as a Percentage of the
Total Pension Liability 83.03% 78.28% 73.20% 75.39% 75.39% 75.17% 73.24% 82.62% 90.49% Safety
Measurement Date 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 Plan's proportion of the Net Pension
Liability (Asset) 0.10505% 0.18865% 0.19496% 0.19379% 0.19992% 0.20325% 0.20805% 0.25479% 0.16741% Plan's proportion share of the
Net Pension Liability (Asset) $6,536,499 $7,773,056 $10,097,455 $11,579,520 $11,730,572 $12,687,811 $13,861,231 $8,941,944 $11,503,411 Plan's Covered Payroll $2,030,918 $2,391,765 $2,488,471 $2,414,626 $2,608,708 $2,672,010 $2,668,668 $3,004,022 $4,610,367 Plan's Proportionate Share of the Net Pension
Liability/(Asset) as a Percentage of its
Covered Payroll 321.85% 324.99% 405.77% 479.56% 449.67% 474.84% 519.41% 297.67% 249.51% Plan’s Fiduciary Net Position as a Percentage of the
Total Pension Liability 81.46% 78.52% 73.96% 71.74% 71.74% 72.10% 70.82% 82.62% 86.61% * - Fiscal year 2015 was the 1st year of implementation.
Last 10 Years*
Prepared for Town of Atherton, a Cost-Sharing Multiple-Employer Defined Pension Plan As of fiscal years ending June 30, 2015 through 2022
SCHEDULE OF THE PLAN'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
78 REQUIRED SUPPLEMENTARY INFORMATION
COST-SHARING MULTIPLE-EMPLOYER DEFINED PENSION PLAN – LAST 10 YEARS*
SCHEDULE OF CONTRIBUTIONS
Miscellaneous
Fiscal Year Ended June 30 2015 2016 2017 2018 2019 2020 2021 2022 2023 Actuarially determined contribution $179,934 $150,616 $305,597 $349,365 $416,994 $480,181 $510,812 $211,663 $667,245 Contributions in relation to the actuarially
determined contributions (179,934) (150,616) (305,597) (349,365) (416,994) (480,181) (510,812) (605,437) (667,245) Contribution deficiency (excess) $0 $0 $0 $0 $0 $0 $0 ($393,774) $0 Covered payroll $1,595,884 $1,772,771 $1,912,587 $2,040,240 $2,127,834 $2,314,721 $2,320,927 $4,610,367 $2,537,827 Contributions as a percentage of
covered payroll 11.27% 8.50% 15.98% 17.12% 19.60% 20.74% 22.01% 13.13% 26.29% Safety
Fiscal Year Ended June 30 2015 2016 2017 2018 2019 2020 2021 2022 2023 Actuarially determined contribution $646,174 $466,548 $849,073 $939,476 $1,042,632 $1,202,924 $1,359,480 $463,859 $1,330,515 Contributions in relation to the actuarially
determined contributions (646,174) (466,548) (849,073) (939,476) (1,042,632) (1,202,924) (1,359,480) (6,470,904) (1,330,515) Contribution deficiency (excess) $0 $0 $0 $0 $0 $0 $0 ($6,007,045) $0 Covered payroll $2,391,765 $2,488,471 $2,414,626 $2,608,708 $2,672,010 $2,668,668 $3,004,022 $4,610,367 $3,274,919 Contributions as a percentage of covered payroll 27.02% 18.75% 35.16% 36.01% 39.02% 45.08% 45.26% 140.36% 40.63% * Fiscal year 2015 was the 1st year of implementation.
Prepared for Town of Atherton, a Cost-Sharing Multiple-Employer Defined Pension Plan As of fiscal year ending June 30, 2023
Last 10 Years*
SCHEDULE OF CONTRIBUTIONS
79 REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS Retiree Healthcare OPEB Plan - Agent Multiple Employer
Last 10 fiscal years*
Measurement Date 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 Total OPEB Liability
Service Cost $257,258 $167,493 $175,867 $215,662 $261,221 $105,341 Interest 755,515 610,002 623,286 622,420 483,322 451,942 Changes in benefit terms
Differences between expected and actual experience (574,495) (11,091) 558,111 (18,835) (1,404,646) 224,199 Changes of assumptions (2,299,690) (849,626) (1,698,656) (7,409) Benefit payments (401,170) (466,422) (419,991) (444,395) (628,249) Implicit subsidy credit (85,496) (91,325) (137,858) (151,197) Net change in total OPEB liability (1,861,412) 279,738 (50,109) (1,437,258) (1,263,104) 153,233 Total OPEB liability - beginning 10,269,746 12,532,328 10,487,049 10,436,940 8,999,682 7,736,578 Total OPEB liability - ending (a) $10,670,916 $10,549,484 $10,436,940 $8,999,682 $7,736,578 $7,889,811 Plan fiduciary net position
Employer - Town's contributions $493,288 $747,885 $672,323 $566,672 $594,061 $626,765 Employer - implicit subsidy 85,496 91,325 137,858
Net investment income 380,626 417,827 322,036 1,432,366 (986,583) 532,619 Administrative expense (15,183) (33,395) (38,683) (44,195) (48,456) (44,314) Benefit payments (401,170) (466,422) (419,991) (444,395) (628,249) Implicit subsidy credit (85,496) (91,325) (137,858) (151,197) Other miscellaneous income/(expense) (54,026) (85,496)
Net change in plan fiduciary net position 804,705 645,651 489,254 1,534,852 (1,036,570) 486,821 Plan fiduciary net position - beginning 5,855,635 6,842,386 7,331,640 8,866,492 7,829,922 Plan fiduciary net position - ending (b) $804,705 $6,501,286 $7,331,640 $8,866,492 $7,829,922 $8,316,743 Net OPEB liability (Asset) - ending (a)-(b) $9,866,211 $4,048,198 $3,105,300 $133,190 ($93,344) ($426,932) Plan fiduciary net position as a percentage of
the total OPEB liability 7.5% 61.6% 70.2% 98.5% 101.2% 105.4% Covered-employee payroll $4,648,758 $4,799,843 $4,983,389 $4,410,693 $5,142,900 $5,737,638 Net OPEB liability as a percentage of
covered-employee payroll 212.23% 84.34% 62.31% 3.02% -1.82% -7.44% * Fiscal year 2018 was the first year of implementation for GASB 75
80 REQUIRED SUPPLEMENTARY INFORMATION
Fiscal Year Ended June 30, 2018 2019 2020 2021 2022 2023 Actuarially determined contribution $693,890 $419,511 $435,103 $465,571 $519,144 $142,708 Contributions in relation to the
actuarially determined contribution 493,288 833,381 763,648 704,530 594,061 626,765 Contribution deficiency (excess) $200,602 ($413,870) ($328,545) ($238,959) ($74,917) ($484,057) Covered-employee payroll $4,648,758 $4,799,843 $4,983,389 $4,410,693 $5,142,900 $5,737,638 Contributions as a percentage of
covered-employee payroll 10.61% 17.36% 15.32% 15.97% 11.55% 10.92% * Fiscal year 2018 was the first year of implementation for GASB 75
SCHEDULE OF CONTRIBUTIONS
Retiree Healthcare OPEB Plan - Agent Multiple Employer
Last 10 fiscal years*
Actuarial Cost Method • Entry Age Normal
Contribution Policy • The Town intends to contribute the full ADC to the PARS trust each year Inflation • 2.50% per annum
Payroll Increases • 2.80% annual increases
Medical Trend • Pre-65: 6.50% for 2023
• Post-65: 5.40% in 2023 decreasing to an ultimate rate of 3.94% by 2075 Mortality • CalPERS 2020 Scale MP-2020
Retiree Healthcare OPEB Plan - Agent Multiple Employer
NOTES TO SCHEDULE OF EMPLOYER CONTRIBUTION
Methods and Assumptions for Actuarially Determined Contribution Discount Rate and Long Term
Expected Rate of Return on
Investment
• 6.00%, based on PARS investment allocation Moderate
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SUPPLEMENTARY INFORMATON
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NON-MAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS
COUNTY MEASURE A FUND accounts for funds received from the County of San Mateo Measure A funds for local transportation purposes.
GAS TAX FUND accounts for funds received from the State of California for road improvement.
EVANS CREATIVE DESIGN FUND accounts for funds received from the Evans estate.
MEASURE M FUND accounts for funds received from the Congestion Management Agency for San Mateo County.
REFUSE RATE STABILIZATION FUND accounts for the surplus of refuse fees.
CAPITAL PROJECTS FUNDS
STORM DRAINAGE FUND accounts for the operation and maintenance costs of drainage systems in the Town.
CHANNEL DRAINAGE DISTRICT accounts for tax revenues collected and channel maintenance costs. 85 County Supplemental Law
Measure A Gas Tax Enforcement Services Measure M
ASSETS
Cash and investment $1,257,175 $328,896 $185 $215,896
Receivables:
Taxes 39,130 29,850
Total Assets $1,296,305 $358,746 $185 $215,896
LIABILITIES
Accounts payable $6,898 $7,932 $1,847
Total Liabilities 6,898 7,932 1,847
FUND EQUITY
Fund balances
Restricted 1,289,407 350,814 $185 214,049
Assigned
Total Fund Balances 1,289,407 350,814 185 214,049
Total Liabilities and Fund Balances $1,296,305 $358,746 $185 $215,896
SPECIAL REVENUE FUNDS
TOWN OF ATHERTON
NON-MAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEET
JUNE 30, 2023
86 CAPITAL PROJECT FUNDS
Refuse Channel Total Nonmajor
Rate County Storm Drainage Governmental
Stabilization Measure W Drainage District Funds
$556,477 $649,971 $32,723 $957,032 $3,998,355
4,672 20,691 439 94,782
$561,149 $670,662 $32,723 $957,471 $4,093,137
$190 $17,111 $33,978
190 17,111 33,978
560,959 $670,662 940,360 4,026,436
$32,723 32,723
560,959 670,662 32,723 940,360 4,059,159
$561,149 $670,662 $32,723 $957,471 $4,093,137
SPECIAL REVENUE FUNDS
87 County Supplemental Law
Measure A Gas Tax Enforcement Services Measure M
REVENUES
Property taxes
Measure Grants $524,932
From other agencies $336,585
Use of money and property 15,267 3,994 $2 $2,623
Miscellaneous
Total Revenues 540,199 340,579 2 2,623
EXPENDITURES
Current:
Police
Public Works 16,580 5,308
Capital Outlay 113,764 340,954 19,952
Total Expenditures 130,344 346,262 19,952
NET CHANGE IN FUND BALANCES 409,855 (5,683) 2 (17,329)
BEGINNING FUND BALANCES 879,552 356,497 183 231,378
ENDING FUND BALANCES $1,289,407 $350,814 $185 $214,049
SPECIAL REVENUE FUNDS
TOWN OF ATHERTON
NON-MAJOR GOVERNMENTAL FUNDS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2023
88 Total
Refuse Channel Nonmajor
Rate County Storm Drainage Governmental
Stabilization Measure W Drainage District Funds
$188,780 $188,780
524,932
($22,104) $233,525 548,006
6,758 7,894 $398 11,624 48,560
(15,346) 241,419 398 200,404 1,310,278
285 874 23,047
17,111 491,781
285 17,985 514,828
(15,631) 241,419 398 182,419 795,450
576,590 429,243 32,325 757,941 3,263,709
$560,959 $670,662 $32,723 $940,360 $4,059,159
SPECIAL REVENUE FUNDS CAPITAL PROJECTS FUNDS
89 SPECIAL REVENUE FUNDS
County Measure A Gas Tax
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
REVENUES
Property taxes
Measure A grants $370,000 $524,932 $154,932
From other agencies $364,979 $336,585 ($28,394)
Use of money and property 15,267 15,267 3,994 3,994
Miscellaneous
Total Revenues 370,000 540,199 170,199 364,979 340,579 (24,400)
EXPENDITURES
Current:
Police
Public Works 16,580 (16,580) 5,308 (5,308)
Non-departmental
Capital Outlay 718,484 113,764 604,720 469,000 340,954 128,046 Total Expenditures 718,484 130,344 588,140 469,000 346,262 122,738 NET CHANGE IN FUND BALANCES ($348,484) 409,855 $758,339 ($104,021) (5,683) $98,338 BEGINNING FUND BALANCES 879,552 356,497
ENDING FUND BALANCES $1,289,407 $350,814
TOWN OF ATHERTON
BUDGETED NON-MAJOR GOVERNMENTAL FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
AND CHANGES IN FUND BALANCES
90 SPECIAL REVENUE FUNDS
Measure M Refuse Rate Stabilization
Variance Variance Variance
Positive Positive Positive
Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $155,000 ($155,000) $75,000 ($75,000) ($22,104) ($22,104) 146 $2 (144) 2,623 $2,623 6,758 6,758
155,146 2 (155,144) 77,623 2,623 (75,000) (15,346) (15,346) 285 (285)
144,616 19,952 124,664
144,616 19,952 124,664 285 (285)
$155,146 2 ($155,144) ($66,993) (17,329) $49,664 (15,631) ($15,631) 183 231,378 576,590
$185 $214,049 $560,959
(Continued)
Supplemental Law Enforcement Services
91 TOWN OF ATHERTON
BUDGETED NON-MAJOR GOVERNMENTAL FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
SPECIAL REVENUE FUNDS
County Measure W
Variance
Positive
Budget Actual (Negative)
REVENUES
Property taxes
Measure grants
From other agencies $145,000 $233,525 $88,525
Use of money and property 7,894 7,894
Miscellaneous
Total Revenues 145,000 241,419 96,419
EXPENDITURES
Current:
Police
Public Works
Non-departmental
Capital Outlay 130,000 130,000
Total Expenditures 130,000 130,000
NET CHANGE IN FUND BALANCES $15,000 241,419 $226,419
BEGINNING FUND BALANCES 429,243
ENDING FUND BALANCES $670,662
92 INTERNAL SERVICE FUNDS
Internal Service Funds are used to finance and account for special activities and services performed by a designated department for other departments in the Town on a cost reimbursement basis.
The concept of major funds does not extend to internal service funds because they do not do business with outside parties. For the Statement of Activities, the net revenues or expenses of each internal service fund is eliminated by netting them against operations of the other Town departments, which generated them. The remaining balance sheet items are consolidated with these same funds in the Statement of Net Position.
However, internal service funds are still presented separately in the Fund financial statements, including the funds below.
EQUIPMENT REPLACEMENT FUND accounts for the financing of replacement equipment within the Town such as vehicles and computer software.
WORKERS’ COMPENSATION INSURANCE FUND accounts for the financing of the Town’s outstanding worker’s compensation liability.
GENERAL LIABILITY FUND accounts for other liabilities including employment liabilities and hosts the insurance costs for liability claims and property losses. The activities for this fund provides for costs to general liability insurance, employment practice insurance, and self-insured retention claim expense.
EMPLOYEE BENEFITS FUND accounts for financing the liabilities for compensated absences and other post-employment benefits other than pension for Town General Fund departments. 93 TOWN OF ATHERTON
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF NET POSITION
JUNE 30, 2023
Workers'
Equipment Compensation General Employee
Replacement Insurance Liability Benefits Total
ASSETS
Current Assets:
Cash and investments $909,740 $1,964,738 $720,840 $1,791,477 $5,386,795 Total Current Assets 909,740 1,964,738 720,840 1,791,477 5,386,795 Non-Current Assets:
Capital assets:
Depreciable 1,861,066 1,861,066
Less: accumulated depreciation (1,503,389) (1,503,389)
Net Capital Asset 357,677 357,677
Total noncurrent assets 357,677 357,677
Total Assets 1,267,417 1,964,738 720,840 1,791,477 5,744,472
LIABILITIES
Current liabilities
Accounts payable 7,426 7,426
Claims payable 62,590 62,590
Compensated absences 613,272 613,272
Total current liabilities 7,426 62,590 613,272 683,288
Noncurrent liabilities
Compensated absences 483,101 483,101
Total noncurrent liabilities 483,101 483,101
Total Liabilities 7,426 62,590 1,096,373 1,166,389
Net investment in capital assets 357,677 357,677
Unrestricted 902,314 1,964,738 658,250 695,104 4,220,406 Total Net Position $1,259,991 $1,964,738 $658,250 $695,104 $4,578,083 94 TOWN OF ATHERTON
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF REVENUES, EXPENSES
AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2023
Workers'
Equipment Compensation General Employee
Replacement Insurance Liability Benefits Total
OPERATING REVENUES
Charges for services $487,740 $355,416 $473,812 $900,891 $2,217,859 Total Operating Revenues 487,740 355,416 473,812 900,891 2,217,859
OPERATING EXPENSES
Insurance 279,688 510,274 789,962
OPEB expense 335,220 335,220
Employee benefits earned 317,876 317,876
Depreciation 156,307 156,307
Supplies and maintenance 136,944 136,944
Total Operating Expenses 293,251 279,688 510,274 653,096 1,736,309 Operating Income (Loss) 194,489 75,728 (36,462) 247,795 481,550
NONOPERATING REVENUES (EXPENSES)
Interest income 11,049 23,860 8,754 21,752 65,415
Total Nonoperating Revenues (Expenses) 11,049 23,860 8,754 21,752 65,415
OTHER FINANCING SOURCES (USES)
Transfers in
Total Other Financing Sources (Uses)
Change in Net Position 205,538 99,588 (27,708) 269,547 546,965 BEGINNING NET POSITION 1,054,453 1,865,150 685,958 425,557 4,031,118 ENDING NET POSITION $1,259,991 $1,964,738 $658,250 $695,104 $4,578,083 95 TOWN OF ATHERTON
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2023
Workers'
Equipment Compensation General Employee
Replacement Insurance Liability Benefits Total
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from other funds $495,790 $355,416 $473,812 $900,891 $2,225,909 Payments to employees for benefits (523,441) (523,441)
Payments to vendors (132,759) (279,688) (547,684) (960,131) Cash Flows from Operating Activities 363,031 75,728 (73,872) 377,450 742,337
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Acquisition of capital assets, net (140,108) (140,108)
Cash Flows (used for) Capital and Related
Financing Activities (140,108) (140,108)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 11,049 23,860 8,754 21,752 65,415
Cash Flows from Investing Activities 11,049 23,860 8,754 21,752 65,415 Net Cash Flows 233,972 99,588 (65,118) 399,202 667,644
Cash and investments at beginning of period 675,768 1,865,150 785,958 1,392,275 4,719,151 Cash and investments at end of period $909,740 $1,964,738 $720,840 $1,791,477 $5,386,795 Reconciliation of operating income (loss) to
net cash flows from operating activities:
Operating income $194,489 $75,728 ($36,462) $247,795 $481,550 Adjustments to reconcile operating income to
net cash flows from operating activities:
Depreciation 156,307 156,307
Compensated absences 129,655 129,655
Change in assets and liabilities:
Accounts receivable 8,050 8,050
Accounts payable 4,185 4,185
Claims payable (37,410) (37,410)
Cash Flows from Operating Activities $363,031 $75,728 ($73,872) $377,450 $742,337 96 CUSTODIAL FUNDS
Custodial Funds account for assets held by a governmental unit in the capacity of agent for individuals, governmental entities, and non-public organizations.
The Custodial Funds used to account for monies held by the Town in a fiduciary capacity are as follows:
H-P PARK IMPROVEMENT FUND donated for Holbrook-Palmer Park improvement.
TREE COMMITTEE Fund maintained for the Tree Committee.
97 TOWN OF ATHERTON
CUSTODIAL FUNDS
STATEMENTS OF CHANGES IN ASSETS AND LIABILITIES
FOR THE YEAR ENDED JUNE 30, 2023
Balance Balance
June 30, 2022 Additions Deductions June 30, 2023
H-P Park Improvement Fund
ASSETS
Cash and investments $6,557 $80 $6,637
Total assets $6,557 $80 $6,637
LIABILITIES
Deposits payable $6,557 $80 $6,637
Total liabilities $6,557 $80 $6,637
Tree Committee
ASSETS
Cash and investments $27,094 $325 $27,419
Total assets $27,094 $325 $27,419
LIABILITIES
Deposits payable $27,094 $325 $27,419
Total liabilities $27,094 $325 $27,419
All Custodial Funds
ASSET
Cash and investments $33,651 $405 $34,056
Total assets $33,651 $405 $34,056
LIABILITIES
Deposits payable $33,651 $405 $34,056
Total liabilities $33,651 $405 $34,056
98 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
To the Honorable Members of the City Council
Town of Atherton, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of the Town of Atherton, California, as of and for the year ended June 30, 2023, and have issued our report thereon dated December 21, 2023.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Town’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Town’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that have not been identified. 99 Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We have also issued a separate Memorandum on Internal Control dated December 21, 2023, which is an integral part of our audit and should be read in conjunction with this report.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the Town’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Pleasant Hill, California
December 21, 2023
100
TOWN OF ATHERTON
MEMORANDUM ON INTERNAL CONTROL
FOR THE YEAR ENDED
JUNE 30, 2023
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TOWN OF ATHERTON
MEMORANDUM ON INTERNAL CONTROL
For the Year Ended June 30, 2023
Table of Contents
Page
Memorandum on Internal Control ............................................................................................................ 1 Schedule of Other Matters .................................................................................................................... 3
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MEMORANDUM ON INTERNAL CONTROL
To the City Council of
the Town of Atherton, California
In planning and performing our audit of the basic financial statements of the Town of Atherton (Town), as of and for the year ended June 30, 2023, in accordance with auditing standards generally accepted in the United States of America, we considered the Town’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Town’s financial statements will not be prevented, or detected and corrected on a timely basis.
Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses. In addition, because of inherent limitations in internal control, including the possibility of management override of controls, misstatements due to error or fraud may occur and not be detected by such controls.
Given these limitations during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Included in the Schedule of Other Matters are recommendations not meeting the above definitions that we believe are opportunities for strengthening internal controls and operating efficiency.
This communication is intended solely for the information and use of management, City Council, others within the organization, and agencies and pass-through entities requiring compliance with Government Auditing Standards, and is not intended to be and should not be used by anyone other than these specified parties.
Pleasant Hill, California
December 21, 2023
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TOWN OF ATHERTON
MEMORANDUM ON INTERNAL CONTROL
SCHEDULE OF OTHER MATTERS
2023-01 Stale Outstanding Checks
Criteria: Items in the outstanding checklist should be kept current to reflect the Town’s cash balance accurately.
Condition: We noted the Town has over thirty outstanding checks, totaling approximately $195 thousand and more than one year old.
Cause: The Town does not have a formal/informal policy for handling outstanding checks.
Potential Effect: This practice does not promote proper control over disbursements.
Recommendation: We recommend that the Town to:
• Establish a formal policy and standard procedures for handling stale checks. • Take appropriate measures to follow up on the existing stale checks and designate staff to follow up regularly every six months.
• Consider publishing stale checks older than one year and writing them off with proper approval if they are not claimed after publication, or send them to the State as unclaimed property.
Management Responses:
The Town is aware that the outstanding checklist should be kept current to reflect the Town’s cash balance accurately. Of the thirty outstanding checks totaling approximately $195 thousand and more, there was one check for $100,000 for refund outstanding to a public utility company for public works deposit. This was voided and reissued to public utility.
The Town informal policy is that it attempts to contact the payee for any outstanding checks to determine if they want/need a check voided and reissued to them accordingly. If contacting the payee is unsuccessful, and the check remains outstanding for up to a year, it is moved to unclaimed property with the state. After 3 years, if still unclaimed, a notice is placed in the local newspaper identifying the unclaimed check. Finally, if this effort does not produce any results, the Town may escheat the checks to the State of California instead of reversing the asset to the Town’s balance sheet. The Town staff will work on publishing checks older than 1 year and those not claimed after publication will be escheated to the State of California. Staff will follow up regularly every six months with payee of outstanding checks. 2023-02 Timeliness of Finalizing Financial Reports
Criteria: Effective organizations develops plans to ensure that adequate resources are available to analyze the general ledger to ensure that all accounts are accurate and the financial reports are reviewed timely for the reporting year.
Condition: Upon the audit completion, the financial report draft was subsequently provided to the finance for review in November 2023. However due to Town staff communication oversight the review was in progress, but was delayed till March of 2024.
Cause: Town Staff reviewed the financial report draft in December and January, noted updates to the financial statements and made notes on updated items. However, staff did not properly update the auditor of their report review and potential changes until March 2024. With the FY 2023/24 mid-year review and the start of the budget process following the new year, staff worked on completing the management discussion analysis. Management bandwidth was overextended on priorities. 3 TOWN OF ATHERTON
MEMORANDUM ON INTERNAL CONTROL
SCHEDULE OF OTHER MATTERS
2023-02 Timeliness of Finalizing Financial Reports (Continued) Potential Effect: The above condition delayed the finalization of the audited financial reports, increasing the risk that unauthorized transactions, errors or misstatements may go undetected, and corrections may not be made in a timely manner.
Recommendation: The Town should analyze staff resources to ensure that the financial report is reviewed timely.
Management Responses:
Staff resources and priorities have been evaluated and are adequate for future financial reports review.
Financial Management dealt with extenuating circumstances that occurred during the Fiscal Year 2022/23 audit. These circumstances are being overcome and staff prioritizes continued adequate finalization of audit reports timely.
4 TOWN OF ATHERTON
MEMORANDUM ON INTERNAL CONTROL
SCHEDULE OF OTHER MATTERS
NEW GASB PRONOUNCEMENTS OR PRONOUNCEMENTS NOT YET EFFECTIVE The following comment represents new pronouncements taking affect in the next few years. We cite them here to keep you informed of developments:
EFFECTIVE FISCAL YEARS 2022, 2023 and 2024:
GASB 99 – Omnibus 2022
The objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing (1) practice issues that have been identified during implementation and application of certain GASB Statements and (2) accounting and financial reporting for financial guarantees. The practice issues addressed by this Statement are as follows:
• Classification and reporting of derivative instruments within the scope of Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, that do not meet the definition of either an investment derivative instrument or a hedging derivative instrument • Clarification of provisions in Statement No. 87, Leases, as amended, related to the determination of the lease term, classification of a lease as a short term lease, recognition and measurement of a lease liability and a lease asset, and identification of lease incentives • Clarification of provisions in Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, related to (a) the determination of the public-private and public-public partnership (PPP) term and (b) recognition and measurement of installment payments and the transfer of the underlying PPP asset
• Clarification of provisions in Statement No. 96, Subscription-Based Information Technology Arrangements, related to the subscription-based information technology arrangement (SBITA) term, classification of a SBITA as a short term SBITA, and recognition and measurement of a subscription liability
• Extension of the period during which the London Interbank Offered Rate (LIBOR) is considered an appropriate benchmark interest rate for the qualitative evaluation of the effectiveness of an interest rate swap that hedges the interest rate risk of taxable debt • Accounting for the distribution of benefits as part of the Supplemental Nutrition Assistance Program (SNAP)
• Disclosures related to nonmonetary transactions
• Pledges of future revenues when resources are not received by the pledging government • Clarification of provisions in Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, as amended, related to the focus of the government-wide financial statements
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GASB 99 – Omnibus 2022, (Continued)
• Terminology updates related to certain provisions of Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position • Terminology used in Statement 53 to refer to resource flows statements.
The Requirements of this Statement are Effective as Follows:
The requirements in paragraphs 26–32 related to extension of the use of LIBOR, accounting for SNAP distributions, disclosures of nonmonetary transactions, pledges of future revenues by pledging governments, clarification of certain provisions in Statement 34, as amended, and terminology updates related to Statement 53 and Statement 63 are effective upon issuance.
The requirements in paragraphs 11–25 related to leases, PPPs, and SBITAs are effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter.
The requirements in paragraphs 4–10 related to financial guarantees and the classification and reporting of derivative instruments within the scope of Statement 53 are effective for fiscal years beginning after June 15, 2023, and all reporting periods thereafter.
Earlier application is encouraged and is permitted by individual topic.
How the Changes in This Statement Will Improve Financial Reporting The requirements of this Statement will enhance comparability in the application of accounting and financial reporting requirements and will improve the consistency of authoritative literature. Consistent authoritative literature enables governments and other stakeholders to more easily locate and apply the correct accounting and financial reporting provisions, which improves the consistency with which such provisions are applied. The comparability of financial statements also will improve as a result of this Statement. Better consistency and comparability improve the usefulness of information for users of state and local government financial statements.
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EFFECTIVE FISCAL YEAR 2023/24:
GASB 100 – Accounting for Changes and Error Corrections The primary objective of this Statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability.
This Statement defines accounting changes as changes in accounting principles, changes in accounting estimates, and changes to or within the financial reporting entity and describes the transactions or other events that constitute those changes. As part of those descriptions, for (1) certain changes in accounting principles and (2) certain changes in accounting estimates that result from a change in measurement methodology, a new principle or methodology should be justified on the basis that it is preferable to the principle or methodology used before the change. That preferability should be based on the qualitative characteristics of financial reporting—understandability, reliability, relevance, timeliness, consistency, and comparability. This Statement also addresses corrections of errors in previously issued financial statements.
This Statement prescribes the accounting and financial reporting for (1) each type of accounting change and (2) error corrections. This Statement requires that (a) changes in accounting principles and error corrections be reported retroactively by restating prior periods, (b) changes to or within the financial reporting entity be reported by adjusting beginning balances of the current period, and (c) changes in accounting estimates be reported prospectively by recognizing the change in the current period. The requirements of this Statement for changes in accounting principles apply to the implementation of a new pronouncement in absence of specific transition provisions in the new pronouncement. This Statement also requires that the aggregate amount of adjustments to and restatements of beginning net position, fund balance, or fund net position, as applicable, be displayed by reporting unit in the financial statements.
This Statement requires disclosure in notes to financial statements of descriptive information about accounting changes and error corrections, such as their nature. In addition, information about the quantitative effects on beginning balances of each accounting change and error correction should be disclosed by reporting unit in a tabular format to reconcile beginning balances as previously reported to beginning balances as restated.
Furthermore, this Statement addresses how information that is affected by a change in accounting principle or error correction should be presented in required supplementary information (RSI) and supplementary information (SI). For periods that are earlier than those included in the basic financial statements, information presented in RSI or SI should be restated for error corrections, if practicable, but not for changes in accounting principles.
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EFFECTIVE FISCAL YEAR 2024/25:
GASB 101 – Compensated Absences
The objective of this Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures.
Recognition And Measurement
This Statement requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. Leave is attributable to services already rendered when an employee has performed the services required to earn the leave. Leave that accumulates is carried forward from the reporting period in which it is earned to a future reporting period during which it may be used for time off or otherwise paid or settled. In estimating the leave that is more likely than not to be used or otherwise paid or settled, a government should consider relevant factors such as employment policies related to compensated absences and historical information about the use or payment of compensated absences. However, leave that is more likely than not to be settled through conversion to defined benefit postemployment benefits should not be included in a liability for compensated absences.
This Statement requires that a liability for certain types of compensated absences—including parental leave, military leave, and jury duty leave—not be recognized until the leave commences. This Statement also requires that a liability for specific types of compensated absences not be recognized until the leave is used.
This Statement also establishes guidance for measuring a liability for leave that has not been used, generally using an employee’s pay rate as of the date of the financial statements. A liability for leave that has been used but not yet paid or settled should be measured at the amount of the cash payment or noncash settlement to be made. Certain salary-related payments that are directly and incrementally associated with payments for leave also should be included in the measurement of the liabilities.
With respect to financial statements prepared using the current financial resources measurement focus, this Statement requires that expenditures be recognized for the amount that normally would be liquidated with expendable available financial resources.
Notes To Financial Statements
This Statement amends the existing requirement to disclose the gross increases and decreases in a liability for compensated absences to allow governments to disclose only the net change in the liability (as long as they identify it as a net change). In addition, governments are no longer required to disclose which governmental funds typically have been used to liquidate the liability for compensated absences. 8 TOWN OF ATHERTON
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GASB 101 – Compensated Absences (Continued)
How the Changes in this Statement Will Improve Financial Reporting The unified recognition and measurement model in this Statement will result in a liability for compensated absences that more appropriately reflects when a government incurs an obligation. In addition, the model can be applied consistently to any type of compensated absence and will eliminate potential comparability issues between governments that offer different types of leave.
The model also will result in a more robust estimate of the amount of compensated absences that a government will pay or settle, which will enhance the relevance and reliability of information about the liability for compensated absences.
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