Staff Report Item 15
TO: East Bay Community Energy Board of Directors
FROM: Jason Bartlett, Finance Manager
SUBJECT: FY 2021-22 Audited Financial Statements (Informational Item) DATE: November 16, 2022
_________________________________________________________________ Recommendation
Accept and file the Fiscal Year 2021-2022 audited financial statements Background and Discussion
EBCE hires an independent auditor to verify the annual financial statements each year. In June of 2019, EBCE selected Pisenti & Brinker, LLP (P&B) as the Authority’s auditor through a formal RFP. They were EBCE’s auditor the previous year and their familiarity with EBCE and CCA finance space made them the best choice.
This year’s audit focuses on EBCE’s financial activities of the fiscal year dating from July 1, 2021, to June 30, 2022.
P&B engaged with an ad-hoc committee of board members throughout the audit process and was assisted by EBCE staff.
The final audited financial statements provide and independently verified, accurate portrait of EBCE’s financial position as of June 30, 2022. These financial statements include EBCE’s financial activities related to:
• Net Position
• Revenues, Expenses, and Changes in Net Position
• Cash Flows
• Accompanying Notes and Subsequent Activities
Highlights from the Statements for the fiscal year include:
Statements of Net Position (Balance Sheet)
• Total Assets increased from $241.3MM to $344.8MM
o Primarily as increase in cash and equivalents, accrued revenue, and account receivables
o GASB-62 fund maintained at $15.8MM of deferred revenues • Total Liabilities increased from $53.5MM to $96.5 million due to increases in outstanding energy costs and security deposits held from counter parties • Total Net Position increased from $171.9MM to $232.5MM as driven by the changes mentioned above for assets and liabilities
o Net Position = Assets – Liabilities – Deferred Revenue • No debt was issued in the fiscal year
Statements of Revenue, Expenses, and Changes in Net Position (Income Statement)
• Net Operating Revenue was approximately $555.3MM, with $14.7MM from power purchase agreement reparations
• Operating Expenses were approximately $501.9MM, with $474.6MM in Cost of Electricity
• EBCE received $7.2MM from non-operating activities as related to CAPP grant payment, interest earned on holdings, and interest paid on commitments • Change in Net Position was $60.6MM
o Change in Net Position = Operating Revenue – Operating Expenses + Net Non-operating Activities
Fiscal Impact
This report has no fiscal impact.
Attachments
A. EBCE’s Audited Financial Statements June 30, 2022
B. Presentation from the Auditor, Pisenti & Brinker
Attachment Staff Report Item 15A
TABLE OF CONTENTS
Basic Financial Statements:
Statements of Revenues, Expenses
Supplementary Information:
Compliance:
Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Governme
Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the 3 Attachment Staff Report Item 15A
SANTA ROSA PETALUMA
RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. 3562 Round Barn Circle, Suite 200
Santa Rosa, CA 95403
(707) 542-3343 Office
(707) 527-5608 Fax
pbllp.com
Independent Auditor's Report
To the Board of Directors
East Bay Community Energy Authority
Oakland, California
Report on the Audits of the Financial Statements
Opinion
We have audited the accompanying financial statements of East Bay Community Energy Authority (EBCE), as of and for the years ended June 30, 2022 and 2021, and the related notes to the financial statements, which collectively comprise EBCE’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 financial position of EBCE as of June 30, 2022 and 2021, and the changes in financial position and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS) 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 Audits of the Financial Statements section of our report. We are required to be independent of EBCE and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the 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 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 EBCE’s ability to continue as a going concern for 12 months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Attachment Staff Report Item 15A
Independent Auditor's Report (continued)
Auditor's Responsibilities for the Audits 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 opinion. 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 GAAS 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 GAAS and Government Auditing Standards, we
Exercise professional judgment and maintain professional skepticism throughout the audits.
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 audits 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 EBCE’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 EBCE’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 audits, significant audit findings, and certain internal control-related matters that we identified during the audits.
Attachment Staff Report Item 15A
Independent Auditor's Report (continued)
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that management's discussion and analysis 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.
Supplementary Information
Our audits were conducted for the purpose of forming an opinion on the financial statements that collectively comprise EBCE's basic financial statements. The schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Unform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and the related notes to the schedule of expenditures of federal awards, are presented for purposes of additional analysis and are 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 audits 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 schedule of expenditures of federal awards 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 October 27, 2022, on our consideration of EBCE’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to solely 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 EBCE’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 EBCE’s internal control over financial reporting and compliance.
Santa Rosa, California
October 27, 2022
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2022 AND 2021
4 ovides an overview of East Bay Community
ial activities as of and for the years ended June 30, 2022 and 2021. The information presented here should be considered in conjunction with the audited financial statements.
BACKGROUND
The formation of EBCE was made possible in 2002 by the passage of California Assembly Bill 117, enabling communities to purchase power on behalf of their residents and businesses and creating competition in power generation.
EBCE was created as a California Joint Powers Authority (JPA) effective December 1, 2016, and was established to provide electric power at competitive costs as well as provide other benefits within Alameda County, including reducing greenhouse gas emissions related to the use of power, procuring energy with a priority on the use and development of local renewable resources, stimulating local job creation through various programs and development, promoting personal and community ownership of renewable resources, as well as promoting long-term electric rate stability and energy reliability for residents and businesses. Governed by a board of directors (Board) consisting of elected representatives from each jurisdiction, EBCE has the rights and powers to set rates for the services it furnishes, incur indebtedness, and issue bonds or other obligations. EBCE is responsible for the acquisition of electric power for its service area.
In June 2018, EBCE began providing service to its first approximately 55,000 customer accounts as part of its initial enrollment phase. This initial phase included municipal and business accounts.
The next major enrollment of residential accounts began in November 2018, which added approximately 500,000 accounts. In April 2021, EBCE expanded their service territory by adding approximately 80,000 accounts. As of June 30, 2022, EBCE had approximately 640,000 customers enrolled.
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2022 AND 2021
5 Financial reporting
EBCE presents its financial statements as an enterprise fund under the economic resources measurement focus and accrual basis of accounting, in accordance with Generally Accepted Accounting Principles (GAAP) for proprietary funds, as prescribed by the Governmental Accounting Standards Board (GASB).
Contents of this report
This report is divided into the following sections:
h provides an overview of the financial
operations.
The basic financial statements:
o The Statements of Net Position
inflows, and net position, and provides information about the nature and amount of resources and obligations at a specific point in time.
o The Statements of Revenues, Expenses, and Changes in Net Position report all of o The Statements of Cash Flows report the cash provided and used by operating activities, as well as other sources and uses, such as capital asset acquisitions and non-capital financing activities.
o The notes to the Basic Financial Statements, which provide additional details and information related to the basic financial statements.
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2022 AND 2021
6 FINANCIAL HIGHLIGHTS
The following table is a summary of and net position, and a discussion of significant changes for the years ended June 30:
2022 2021 2020
Current assets $ 319,677,508 $ 218,280,050 $ 207,412,111 Noncurrent assets
Capital assets, net of depreciation 8,760,016 115,816 148,053 Other noncurrent assets 16,356,858 22,855,208 12,821,208 Total noncurrent assets 25,116,874 22,971,024 12,969,261 Total assets 344,794,382 241,251,074 220,381,372
Current liabilities 96,450,766 53,525,550 57,899,438
Total liabilities 96,450,766 53,525,550 57,899,438
Deferred inflows of resources 15,814,000 15,814,000 12,680,000 Net position
Invested in capital assets 8,760,016 115,816 148,053
Restricted for collateral 9,000,000 10,000,000 11,000,000 Unrestricted 214,769,600 161,795,708 138,653,881
Total net position $ 232,529,616 $ 171,911,524 $ 149,801,934 Current assets
Current assets were approximately $319,678,000 at the end of 2022 and are mostly comprised of cash of $152,215,000, accounts receivable of $79,814,000, accrued revenue of $47,590,000, prepaid expenses of $8,728,000, and restricted cash of $9,000,000. The current asset accounts increased in 2022 as a result of operating surpluses.
Capital assets
Capital assets are reported net of depreciation. EBCE does not own assets used for electricity generation or distribution. In September 2021, EBCE purchased an office building at 251 8th Street in Oakland to be used for its future headquarters. The cost of the building and land was approximately $8,500,000 and was under renovation as of June 30, 2022. Presently, the cost of the building and land is classified on the Statemen
complete, the building will be depreciated over its estimated remaining useful life of 30-years.
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2022 AND 2021
7 Other noncurrent assets
Included in other noncurrent assets as of June 30, 2022, and June 30, 2021, is $15,814,000 in its Rate Stabilization Fund to be used in later years when financial results are stressed. By deferring revenue to be used in future years, EBCE will be better able to avoid sudden rate increases to address unanticipated spikes in energy costs and other unforeseen circumstances.
Also included in noncurrent assets at June 30, 2021, was $7,000,000 in restricted cash that is collateral on a credit facility that expires in January 2023. This restricted amount is grouped with current assets for the year ended June 30, 2022.
EBCE agreed to loan $1,000,000 to BlocPower Energy Services (the borrower), a Delaware limited liability company. The borrower assists low to moderate income customers and landlords by providing energy-efficient electrical equipment and installation with limited upfront costs and long-term payment options. The amount of the loan funded as of June 30, 2022 is $500,000.
Current liabilities
Current liabilities consist mostly of the cost of electricity delivered to customers that is not due to be paid by EBCE until after year-end. Other components include trade accounts payable, taxes and surcharges due to other governments, and various other accrued liabilities.
Current liabilities increased from 2021 to 2022 due to an increase in accrued cost of electricity and an increase in security deposits. Accrued cost of electricity increased in 2022 due to rising prices fueled by volatility in the energy market. Also relating to market volatility, EBCE required more energy suppliers to post security deposits in 2022 than in 2021 to help ensure contracted energy products would be delivered.
Deferred inflows of resources
Included in deferred inflows of resources at June 30, 2022 and June 30, 2021, is $15,814,000 in a Rate Stabilization Fund to be used and recorded as revenue in later years when financial results are stressed.
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2022 AND 2021
8 The following table is a summary of EBCE nd a discussion of significant changes for the years ended June 30:
2022 2021 2020
Operating revenues $ 555,332,546 $ 423,502,860 $ 463,381,478 Nonoperating revenues 7,901,267 - -
Investment income 221,757 636,395 1,357,175
Total income 563,455,570 424,139,255 464,738,653
Operating expenses 501,933,974 401,160,053 395,567,000
Nonoperating expenses 903,504 869,612 743,178
Total expenses 502,837,478 402,029,665 396,310,178
Change in net position 60,618,092 $ $ 22,109,590 $ 68,428,475 Operating revenues
In April 2021, EBCE expanded its service territory to include an additional 80,000 customer accounts. The year ended June 30, 2022, is the first full year with the expanded customer accounts and is the main reason for the increase in operating revenues.
Nonoperating revenues
The nonoperating revenue increase is primarily the result of grant income from the California Arrearage Payment Plan (CAPP) that was received in 2022.
Operating expenses
of electricity delivered to customers. EBCE
procures energy from a variety of sources and focuses on maintaining a balanced renewable power portfolio at competitive costs to its customers. Expenses for staff compensation, contract services, and other general and administrative expenses increased each year as the organization continued to grow to support its business demands. EBCE had sufficient revenues each year to meet its operating expense obligations.
The cost of electricity increased each year as a result of service territory expansion and overall higher market prices.
Nonoperating expenses
Nonoperating expenses represent interest and fees related to letters of credit and the unused portion of the credit facility.
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2022 AND 2021
9 ECONOMIC OUTLOOK
California Independent System Operator (CAISO) system power prices experienced volatility through the year ended June 30, 2022. This level of volatility was somewhat consistent with year-to-year historical volatility that occurs due to seasonal and annual weather changes and was also characterized by a marked increase in energy prices from historical levels. This was due to more extreme weather events, energy infrastructure capacity constraints in CAISO, and geopolitical considerations in the natural gas industry.
In February 2022, Russia invaded Ukraine, which caused global energy prices to spike dramatically. Although occurring in Europe, this conflict disrupts global natural gas distribution, supply, and demand, and as such does influence California markets. While some effects of this were forecasted, this event did increase gas market price volatility more so and persists at the time of this audit. Hedges EBCE has in place will offset much of the immediate price spike impacts, but we are currently experiencing a rising energy price environment for the foreseeable future. As rates are currently set as a discount to PG&E, EBCE expects to continue to remain competitive, and is seeing a significant increase in revenues.
While the COVID-19 pandemic is ongoing, energy loads were in line with forecasts and budget and in general energy use activity has returned to pre-pandemic patterns. Customer account aging has stabilized and recovery efforts through State and Federal funding have reduced overall aging impacts from shelter-in-place policies.
EBCE has in place a formal risk management policy that includes guidance on target hedge levels.
Energy hedging is intended to reduce the financial risk of unexpected price surges by procuring a significant portion of future energy at fixed prices. The target hedge percentages depend on factors including time and the hedge pricing relative to historical energy costs. In general, EBCE targets hedging 60-100% of its exposure in energy products on a short-duration basis of under a year and aims to hedge greater than 80% of its exposure going into any particular month. EBCE has complied with its risk management policy and regulations Year-over-year, EBCE has retained a strong customer and revenue base with low opt-out levels.
EBCE continues to be actively engaged on legislative and regulatory matters that can impact EBCE's energy procurement requirements and, therefore, energy-related expenditures. This provides some level of additional certainty on EBCE revenues.
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2022 AND 2021
10 REQUEST FOR INFORMATION
This financial report is designed to provide EBCE
ability for the funds under its
stewardship.
Please address any questions about this report or requests for additional financial information to 1999 Harrison Street, 8th Floor, Oakland, CA 94612.
Respectfully submitted,
Nick Chaset, Chief Executive Officer
Attachment Staff Report Item 15A
BASIC FINANCIAL STATEMENTS
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
STATEMENTS OF NET POSITION
AS OF JUNE 30, 2022 AND 2021
11 The accompanying notes are an integral part of these financial statements. 2022 2021
Current assets
Cash and cash equivalents $ 152,215,061 $ 129,847,706
Accounts receivable, net of allowance 79,814,399 43,911,325 Accrued revenue 47,590,010 27,952,207
Market settlements receivable - 5,025,939
Other receivables 6,302,352 708,188
Prepaid expenses 8,728,326 6,247,325
Deposits 16,027,360 1,587,360
Restricted cash 9,000,000 3,000,000
Total current assets 319,677,508 218,280,050
Noncurrent assets
Unrestricted cash and cash equivalents in Rate Stabilization Fund 15,814,000 15,814,000 Restricted cash - 7,000,000
Deposits 42,858 41,208
Loan receivable 500,000 - Capital assets:
Land and construction-in-progress 8,605,533 - Capital assets, net of depreciation 154,483 115,816 Total capital assets 8,760,016 115,816
Total noncurrent assets 25,116,874 22,971,024
Total assets 344,794,382 241,251,074
Current liabilities
Accrued cost of electricity 60,283,371 38,815,244
Accounts payable 2,824,571 3,264,853
Other accrued liabilities 1,631,542 750,185
User taxes and energy surcharges due to other governments 5,846,282 3,857,146 Security deposits - energy suppliers 25,865,000 6,838,122 Total current liabilities 96,450,766 53,525,550
Rate Stabilization Fund 15,814,000 15,814,000
Investment in capital assets 8,760,016 115,816
Restricted for collateral 9,000,000 10,000,000
Unrestricted 214,769,600 161,795,708
Total net position $ 232,529,616 $ 171,911,524
NET POSITION
ASSETS
LIABILITIES
DEFERRED INFLOWS OF RESOURCES
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
STATEMENTS OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION
YEARS ENDED JUNE 30, 2022 AND 2021
12 The accompanying notes are an integral part of these financial statements. 2022 2021
OPERATING REVENUES
Electricity sales, net $ 538,713,401 $ 425,733,911
Revenue deferred to Rate Stabilization Fund - (3,134,000) Liquidated damages 14,658,400 -
Grant revenue 1,614,597 -
Other revenue 346,148 902,949
Total operating revenues 555,332,546 423,502,860
OPERATING EXPENSES
Cost of electricity 474,633,255 377,480,734
Contract services 16,611,808 13,906,614
Staff compensation 7,887,849 7,134,883
General and administration 2,738,461 2,585,219
Depreciation 62,601 52,603
Total operating expenses 501,933,974 401,160,053
Operating income 53,398,572 22,342,807
NONOPERATING REVENUES (EXPENSES)
Grant revenue 7,901,267 -
Interest income 221,757 636,395
Financing expense (903,504) (869,612)
Nonoperating revenues (expenses), net 7,219,520 (233,217) CHANGE IN NET POSITION 60,618,092 22,109,590
Net position at beginning of year 171,911,524 149,801,934 Net position at end of year $ 232,529,616 $ 171,911,524 Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2022 AND 2021
13 The accompanying notes are an integral part of these financial statements. 2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 503,810,291 $ 448,902,853
Other operating receipts 44,726,247 8,937,471
Payments to suppliers for electricity (477,173,526) (391,197,468) Payments for other goods and services (21,925,338) (16,534,847) Payments for staff compensation (7,748,575) (6,963,515) Tax and surcharge payments to other governments (18,648,636) (19,163,570) Net cash provided by operating activities 23,040,463 23,980,924
CASH FLOWS FROM NON-CAPITAL
FINANCING ACTIVITIES
Grant income 7,901,267 - Financing expense payments (683,084) (1,082,956) Net cash provided (used) by non-capital
financing activities 7,218,183 (1,082,956)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments to acquire capital assets (8,613,048) (33,951)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 221,757 636,395
Loan issued (500,000) - Net cash provided (used) by investing activities (278,243) 636,395 Net change in cash and cash equivalents 21,367,355 23,500,412 Cash and cash equivalents at beginning of year 155,661,706 132,161,294 Cash and cash equivalents at end of year $ 177,029,061 $ 155,661,706 Reconciliation to the Statement of Net Position
Unrestricted cash and cash equivalents (current) $ 152,215,061 $ 129,847,706 Restricted cash and cash equivalents (current) 9,000,000 3,000,000 Unrestricted cash and cash equivalents (noncurrent) 15,814,000 15,814,000 Restricted cash and cash equivalents (noncurrent) 7,000,000 - Cash and cash equivalents $ 177,029,061 $ 155,661,706 Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 2022 AND 2021
14 The accompanying notes are an integral part of these financial statements. 2022 2021
Operating income $ 53,398,572 $ 22,342,807
Adjustments to reconcile operating income to net
cash provided by operating activities
Depreciation expense 62,601 52,603
Revenue adjusted for allowance for
uncollectible accounts 4,710,670 10,916,254
(Increase) decrease in:
Accounts receivable (40,613,747) (4,745,575)
Market settlements receivable 5,025,941 (3,045,683)
Other receivables (5,594,164) (596,927)
Accrued revenue (19,637,803) (1,821,740)
Prepaid expenses (2,480,999) 1,507,944
Deposits (14,441,650) 384,200
Increase (decrease) in:
Accrued cost of electricity 21,468,127 (11,505,052)
Accounts payable (754,456) 882,193
Other accrued liabilities 139,274 171,368
Deferred revenue 742,083 (120,019)
User taxes due to other governments 1,989,136 (343,571) Security deposits from energy suppliers 19,026,878 6,768,122 Rate Stabilization Fund 3,134,000 -
Net cash provided by operating activities $ 23,040,463 $ 23,980,924
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2022 AND 2021
15 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
East Bay Community Energy Authority (EBCE) is a California joint powers authority created on December 1, 2016. As of June 30, 2022, parties to its Joint Powers Agreement consist of the following local governments, plus one representative (non-voting) from the Community Advisory Committee (CAC):
County Cities
Alameda Albany Newark
Berkeley Oakland
Dublin Piedmont
Emeryville Pleasanton
Fremont San Leandro
Hayward Tracy
Livermore Union City
EBCE is separate from, and derives no financial support from, its members. EBCE is governed by a Board of Directors whose membership is composed of elected officials representing the member governments.
A core function of EBCE is to provide electric service that includes the use of renewable sources under the Community Choice Aggregation Program under California Public Utilities Code Section 366.2.
EBCE began its energy delivery operations in June 2018. Electricity is acquired from electricity suppliers and delivered through existing physical infrastructure and equipment managed by Pacific Gas and Electric Company.
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2022 AND 2021
16 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING
accordance with generally accepted accounting
principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements. mental enterprise fund and are reported using
the economic resources measurement focus and
business enterprises. Accordingly, revenues are recognized when they are earned, and expenses are recognized at the time liabilities are incurred. Enterprise fund-type operating statements present increases (revenues) and decreases (expenses) in total net position. Reported net position in capital assets, restricted and unrestricted.
When both restricted and unrestricted resources ar
restricted resources first, and then unrestricted resources as they are needed.
CASH AND CASH EQUIVALENTS
For purpose of the Statements of Cash Flows, EBCE has defined cash and cash equivalents to include cash on hand, demand deposits, and short-term investments with an original maturity of three months or less. For the purpose of the Statements of Net Position, restricted cash balances are presented separately. Restricted cash reported on the Statements of Net Position includes collateral on a credit facility, as well as a required minimum balance to be maintained in one of its bank accounts.
MARKET SETTLEMENTS RECEIVABLE
EBCE receives generation scheduling and other services from a registered California Independent System Operator (CAISO) scheduling coordinator.
PREPAID ENERGY PURCHASES AND DEPOSITS
Various energy contracts entered into by EBCE require EBCE to provide the supplier with a security deposit. The deposits are generally held for the term of the contract. Deposits are classified as current or noncurrent assets depending on the length of the time the deposits will be held. While these energy contract-related deposits make up the majority of this item, other components include deposits for regulatory and other operating purposes.
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2022 AND 2021
17 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
CAPITAL ASSETS AND DEPRECIATION
pment valued over $1,000 that is expected to be
in service for over one year. Depreciation is computed according to the straight-line method over estimated useful lives of three years for electronic equipment, seven years for furniture and seven years for leasehold improvements, unless limited by the length of the original lease term. EBCE does not own any electric generation assets.
SECURITY DEPOSITS LIABILITY
Various energy contracts entered into by EBCE require the supplier to provide EBCE with a security deposit. Often this security is held by EBCE for the duration of the contract or until certain milestones are met. Deposits are classified as current or noncurrent depending on the length of time the deposits will be held.
RATE STABILIZATION FUND
EBCE created a Rate Stabilization Fund to allow EBCE to defer revenue in years when financial results are strong to be used in future years when financial results are stressed. In accordance with GASB Statement No. 62 and GASB Statement No. 65, the amount recognized as an addition to the fund is shown as a reduction of operating revenues and reported on the statements of net position as a deferred inflow of resources.
EBCE directed revenue of $0 and $3,134,000 to the Rate Stabilization Fund for the years ended June 30, 2022 and 2021, respectively.
NET POSITION
Net position is presented in the following components:
Investment in capital assets: This component of net position consists of capital assets, net of accumulated depreciation and reduced by outstanding borrowings that are attributable to the acquisition, construction, or improvement of those assets. EBCE did not have any such borrowings outstanding as of June 30, 2022 and 2021.
Restricted: This component of net position consists of constraints placed on net asset use through external constraints imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation.
Unrestricted: This component of net position consists of net position that does not meet the Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2022 AND 2021
18 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
OPERATING AND NONOPERATING REVENUES
Operating revenues include revenues derived from the provision of energy to end-use retail customers and grant revenue earned from the delivery of program activities. Operating revenues are affected by amounts directed to or from the Rate Stabilization Fund.
Investment income is consider n grant revenue, such as from the California Arrearage Payment Program (CAPP), is also cons
REVENUE RECOGNITION
EBCE recognizes revenue on the accrual basis. This includes invoices issued to customers during the reporting period and electricity estimated to have been delivered but not yet billed.
Management estimates that a portion of the billed amounts will be uncollectible. Accordingly, an allowance for uncollectible accounts has been recorded.
OPERATING AND NONOPERATING EXPENSES
Operating expenses include the costs of sales and services, administrative expenses, and depreciation on capital assets. Expenses not meeting this definition are reported as nonoperating expenses.
ELECTRICAL POWER PURCHASED
During the normal course of business, EBCE purchases electrical power from numerous suppliers. Electricity costs include the cost of energy and capacity arising from bilateral contracts with energy suppliers as well as generation credits, and load and other charges arising from centralized market. The cost to acquire electricity and capacity atements of Revenues, Expenses and Changes in
Net Position.
ble Portfolio Standards (RPS) and self-imposed
benchmarks, EBCE acquires RPS eligible renewable energy evidenced by Renewable Energy Certificates (Certificates) recognized by the Western Renewable Energy Generation Information System. EBCE obtains Certificates with the intent to retire them and does not sell or build surpluses of Certificates with a profit motive. EBCE recognizes an expense on a monthly basis that corresponds to the volume sold to its customers for its various renewable and carbon-free products. This expense recognition increases accrued cost of electricity reported on the Statements of Net Position until the time the payment has been made to the supplier.
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2022 AND 2021
19 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ELECTRICAL POWER PURCHASED (continued)
EBCE purchases capacity commitments from qualifying electricity generators to comply with the ogram. The goals of the Resource Adequacy Program are to provide sufficient resources to CAISO to ensure the safe and reliable operation of the electrical grid in real-time and to provide appropriate incentives for the siting and construction of new resources needed for reliability in the future.
STAFFING COSTS
EBCE pays employees semi-monthly and fully pays its obligation for health benefits and contributions to its defined contribution retirement plan monthly. EBCE is not obligated to provide post-employment healthcare or other fringe benefits, and accordingly, no related liability is recorded in these financial statements. EBCE provides compensated absences, and the related liability is recorded in these financial statements.
INCOME TAXES
EBCE is a joint powers authority under the provision of the California Government Code and is not subject to federal or state income or franchise taxes.
ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the prior-year financial statements have been reclassified for comparative purposes to conform to the presentation of the current-year financial statements. These reclassifications did not result in any change in previously reported net position.
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2022 AND 2021
20 2. CASH AND CASH EQUIVALENTS
EBCE maintains its cash in both interest-bearing and non-interest-bearing accounts at River City Bank in Sacramento, California. Bank are subject to California Government Code Section 16521, which requires that River City Bank collateralize public funds in excess of the Federal Deposit Insurance Corporation limit of $250,000 by 110%. EBCE has no deposit or investment policy that addresses a specific type of risk that would impose restrictions beyond this code. Accordingly, the amount of risk is not disclosed. EBCE monitors its risk exposure to River City Bank on an ongoing basis.
3. ACCOUNTS RECEIVABLE
Accounts receivable were as follows as of June 30:
2022 2021
Accounts receivable from customers 101,011,756 $ $ 60,398,009 Allowance for uncollectible accounts (21,197,357) (16,486,684) Net accounts receivable $ 79,814,399 $ 43,911,325
The majority of account collections occur within the first few months following customer invoicing. EBCE estimates that a portion of the billed accounts will not be collected. EBCE continues collection efforts on accounts in excess of de minimis balances regardless of the age of the account. Although collection success generally decreases with the age of the receivable, EBCE continues to have success collecting older accounts. The allowance for uncollectible accounts at the end of a period includes amounts billed during the current and prior fiscal years.
During the year ended June 30, 2022, EBCE received CAPP funds (see Note 6) that helped offset previously written off accounts receivable.
4. CAPITAL ASSETS
Capital asset activity for the years ended June 30, 2022 and 2021, was as follows:
Furniture &
Equipment
Land and
Construction-in- Progress
Accumulated
Depreciation Total
Balances at June 30, 2020 210,739 $ $ (62,686) - $ $ 148,053 Additions 20,366 (52,603) - (32,237)
Balances at June 30, 2021 231,105 (115,289) - 115,816
Additions 101,268 8,605,533 (62,601) 8,644,200
Balances at June 30, 2022 332,373 $ $ 8,605,533 $ (177,890) $ 8,760,016 Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2022 AND 2021
21 5. DEBT
In January 2020, EBCE entered into an amended revolving credit agreement with Barclays Bank.
The available credit line under this agreement is $80,000,000. The credit agreement enhances agreement terminates in January 2023. The borrowing rate on the credit facility is LIBOR, or its replacement rate, plus 2.5%.
EBCE had no debt outstanding under its line of credit agreement at June 30, 2022 or 2021.
However, EBCE did issue Standby Letters of Credit secured by the line of credit agreement. At June 30, 2022, these Letters of Credit reduce the available portion of the line by approximately $13,147,000 but are not considered debt to EBCE.
6. GRANTS
EBCE administers a grant from the California Arrearage Payment Program (CAPP) that offers financial assistance for California energy utility customers to help reduce past due energy bill balances that increased during the COVID-19 pandemic. This program is funded through the federal American Rescue Plan Act (ARPA) with Coronavirus State and Local Fiscal Recovery Funds.
EBCE also administers a grant from the California Public Utilities Commission (CPUC) for the Disadvantaged Communities Green Tariff (DAC-GT). This grant provides for bill discounts to eligible customers.
The following is a summary grant revenue for the years ended June 30:
2022 2021
CAPP $ 7,901,267 $ - DAC 1,614,597 -
Total grant revenue 9,515,864 $ $ -
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2022 AND 2021
22 7. DEFINED CONTRIBUTION RETIREMENT PLAN
The East Bay Community Energy Authority 401(a) Plan (the Plan) is a defined contribution retirement plan administered by LT Trust. As of June 30, 2022, there were 46 plan members.
EBCE is required to contribute a match up to 6% of annual covered payroll to the Plan and contributed $929,000 and $816,000 during the years ended June 30, 2022 and 2021, respectively.
EBCE has elected out of the Social Security system for employees eligible for the Plan. As part of this election, EBCE makes re to the Plan. Plan provisions are established and may be amended by the Board of Directors.
8. RISK MANAGEMENT
EBCE is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; and errors and omissions. During the year, EBCE purchased insurance policies from investment-grade commercial carriers to mitigate risks that include those associated with earthquakes, theft, general liability, errors and omissions, and property damage. Deductible limits range from $0 to $1,000. Settled claims have not exceeded coverage in the last two years. There were no significant reductions in coverage compared to the prior year. From time to time, EBCE may be party to various pending claims and legal proceedings. Although the outcome of such matters cannot be forecasted with certainty, it is the opinion of counsel that the likelihood is remote that any such claims or proceedings will have a material position or results of operations.
EBCE maintains risk management policies, procedures and systems that help mitigate credit, liquidity, market, operating, regulatory and other risks that arise from participation in the California energy market. Credit guidelines include a preference for transacting with investment-financial condition and assigning credit limits as applicable. These credit limits are established based on risk and return considerations under terms customarily available in the industry. In addition, EBCE enters into netting arrangements whenever possible and where appropriate obtains collateral and other performance assurances from counterparties.
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2022 AND 2021
23 9. PURCHASE COMMITMENTS
In the ordinary course of business, EBCE enters into various power purchase agreements in order to acquire renewable and other energy and electric capacity. The price and volume of purchased power may be fixed or variable. Variable pricing is generally based on the market price of either natural gas or electricity at the date of delivery. Variable volume is generally associated with contracts to purchase energy from as-available resources such as solar, wind, and hydroelectric facilities.
The following table details the obligations on existing energy, renewable, and resource adequacy (RA) contracts as of June 30, 2022:
Years ending June 30,
2023 $ 286,000,000
2024 205,000,000
2025 176,000,000
2026 153,000,000
2027 135,000,000
2028-2043 1,302,000,000
Total $ 2,257,000,000
10. LEASE
In February 2019, EBCE entered into a 39-month non-cancelable lease for its office premise from August 1, 2019 through October 31, 2022. Rental e
and $429,000 for the years ended June 30, 2022, and 2021, respectively.
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2022 AND 2021
24 11. FUTURE GASB PRONOUNCEMENTS
The requirements of the following GASB Statements are effective for years ending after June 30, 2022:
GASB has approved GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, GASB Statement No. 96, Subscription-Based Information Technology Arrangements, GASB Statement No. 97, Certain Component Unit Criteria and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, GASB Statement No. 99, Omnibus 2022, GASB Statement No. 100, Amendment of GASB Statement No. 62,
and GASB Statement No. 101, Compensated Absences. When they become effective, application of these standards may restate portions of these financial statements.
12. SUBSEQUENT EVENTS
NEW MEMBER
In October 2022, EBCE admitted the City of Stockton as a member. EBCE anticipates electric deliveries in this new territory will begin in 2024.
Attachment Staff Report Item 15A
SUPPLEMENTARY INFORMATION
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2022
25 See accompanying Notes to Schedule of Expenditures of Federal Awards Federal Grantor/Pass-Through Grantor/Program
Federal
Assistance
Listing Number
Pass-Through
Entity
Identifying
Number
Total Federal
Expenditures
Department of the Treasury
California Department of Community
Services and Development (CSD)
COVID-19 American Rescue Plan Act (ARPA)
Coronavirus State and Local Fiscal Recovery Funds
California Arrearage Payment Program (CAPP) 21.027 68-0283471 7,901,267 $ Total Department of the Treasury 7,901,267
Total expenditures of federal awards $ 7,901,267
Attachment Staff Report Item 15A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2022
26 1. BASIS OF PRESENTATION
The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal grant activity of East Bay Community Energy (EBCE) under programs of the federal government for the year ended June 30, 2022. The information in the Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this Schedule may differ from amounts presented in, or used in the preparation of, EBCE's financial statements.
Because the Schedule presents only a selected portion of the operations of EBCE, it is not intended to and does not present the financial position, changes in the net position or cash flows of EBCE.
All federal awards received directly from federal agencies, as well as federal awards passed through nonfederal agencies and organizations are included in the Schedule. Pass-through entity identifying numbers are presented when available.
The reporting entity for EBCE is based upon criteria established by the Governmental Accounting Standards Board.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR FEDERAL AWARDS
Expenditures on the accompanying Schedule are reported on an accrual basis of accounting.
Expenditures are recognized when approved for payment and posted to EBCE's accounting system. Expenditures are incurred prior to including on the Schedule. Expenditures for federal awards are recognized following the cost principles contained in the Uniform Guidance. Under these cost principles certain types of expenditures are not allowable or are limited as to reimbursement.
3. SUB-RECIPIENTS
Of the federal expenditures presented in the Schedule, EBCE did not provide federal awards to sub-recipients for the year ended June 30, 2022.
3. INDIRECT COSTS
EBCE did not elect to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance.
Attachment Staff Report Item 15A
COMPLIANCE
Attachment Staff Report Item 15A
SANTA ROSA PETALUMA
RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. 3562 Round Barn Circle, Suite 200
Santa Rosa, CA 95403
(707) 542-3343 Office
(707) 527-5608 Fax
pbllp.com
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
Independent Auditor's Report
Board of Directors
East Bay Community Energy
Oakland, California
We have audited, 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, the financial statements of the business-type activities East Bay Community Energy ("EBCE"), as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise EBCE's basic financial statements, and have issued our report thereon dated October 27, 2022.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the EBCE'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 opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of EBCE’s internal control.
Accordingly, we do not express an opinion on the effectiveness of EBCE’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 combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of EBCE'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 were not identified.
Attachment Staff Report Item 15A
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 (continued)
Independent Auditor's Report (continued)
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether EBCE’s financial statements are free of 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.
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 results of that testing, and not to provide an opinion on the effectiveness of EBCE's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering EBCE's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Santa Rosa, California
October 27, 2022
Attachment Staff Report Item 15A
SANTA ROSA PETALUMA
RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. 3562 Round Barn Circle, Suite 200
Santa Rosa, CA 95403
(707) 542-3343 Office
(707) 527-5608 Fax
pbllp.com
Report on Compliance for Each Major Federal Program
and Report on Internal Control Over Compliance
Required by the Uniform Guidance
Independent Auditor's Report
Board of Directors
East Bay Community Energy Authority
Oakland, California
Report on Compliance for Each Major Federal Program
Opinion on Each Major Federal Program
We have audited East Bay Community Energy Authority’s compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of East Bay Community Energy Authority’s major federal programs for the year ended June 30, 2022. East Bay Community Energy Authority’s major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs.
In our opinion, East Bay Community Energy Authority complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2022.
Basis for Opinion on Each Major Federal Program
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America (GAAS); the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards); and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report.
We are required to be independent of East Bay Community Energy Authority and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of East Bay Community Energy Authority’s compliance with the compliance requirements referred to above.
Attachment Staff Report Item 15A
Report on Compliance for Each Major Federal Program
and Report on Internal Control Over Compliance
Required by the Uniform Guidance (continued)
Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules and provisions of contracts or grant agreements applicable to East Bay Community Energy Authority’s federal programs.
Auditor's Responsibilities for the Audit of Compliance
Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on East Bay Community Energy Authority’s compliance based on our audit. 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 GAAS, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material, if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about East Bay Community Energy Authority’s compliance with the requirements of each major federal program as a whole.
In performing an audit in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance, we
exercise professional judgment and maintain professional skepticism throughout the audit. identify and assess the risks of material noncompliance, 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 East Bay Community Energy Authority’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. obtain an understanding of East Bay Community Energy Authority’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of East Bay Community Energy Authority’s internal control over compliance. Accordingly, no such opinion is expressed.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit.
Attachment Staff Report Item 15A
Report on Compliance for Each Major Federal Program
and Report on Internal Control Over Compliance
Required by the Uniform Guidance (continued)
Report on Internal Control Over Compliance
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified.
Our audit was not designed for the purpose of expressing an opinion on the effectiveness over internal control over compliance. Accordingly, no such opinion is expressed.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Santa Rosa, California
October 27, 2022
Attachment Staff Report Item 15A
East Bay Community Energy
Schedule of Findings and Questioned Costs
Year Ended June 30, 2022
32 I. Summary of Auditor's Results
Financial Statements
Type of report the auditor issued on whether the financial statement audited were prepared in accordance with GAAP: Unmodified Internal control over financial reporting:
Material weaknesses identified? No
Significant deficiencies identified? None reported
Noncompliance material to financial statements noted? No Federal Awards
Internal control over major programs:
Material weaknesses identified? No
Significant deficiencies identified? None reported
Type of auditor's report issued on compliance for major federal programs: Unmodified Any audit findings disclosed that are required to be
reported in accordance with 2 CFR 200.516(a)? No
Identification of major federal programs:
Assistance Listing
Number Name of Federal Program or Cluster
21.027 Coronavirus State and Local Fiscal Recovery Funds Dollar threshold used to distinguish between type A and type B program: $750,000 Auditee qualified as low-risk auditee? No
Attachment Staff Report Item 15A
East Bay Community Energy
Schedule of Findings and Questioned Costs
Year Ended June 30, 2022
33 II. Financial Statement Findings
No matters are reportable
III. Federal Award Findings and Questioned Costs
No matters are reportable
Attachment Staff Report Item 15A
East Bay Community Energy
Summary Schedule of Prior Audit Findings
Year Ended June 30, 2022
34 No Uniform Guidance audit performed in prior year.
Attachment Staff Report Item 15A
East Bay Community Energy
Report to the Board of Directors
November 16, 2022
Attachment Staff Report Item 15B
Introduction
• Brett Bradford, CPA
• Audit Partner
• 18 years in public accounting and performing audits of government entities
• Currently working with several CCA’s throughout California • Aliandra Schaffer
• Engagement Manager
• 4 years in public accounting and performing audits of governments (CCA’s)
Attachment Staff Report Item 15B
Results of current year audit:
• The audit is complete. We have reported the following:
• Unmodified opinion – Based on our audit, the financial statements are materially accurate.
• No significant deficiencies or material weakness in
internal control have been identified.
Attachment Staff Report Item 15B
Audit of the year ended June 30, 2022
Financial Statements
Relative Roles & Responsibilities
• Management is responsible for preparing the Financial Statements and establishing a system of internal control.
• Auditor is responsible for auditing the Financial Statements • Considering risks of material misstatement in the Financial Statements
• Considering internal controls relevant to the Financial Statements • Performing tests of year-end balances based on risk assessment • Evaluating adequacy of disclosures
Attachment Staff Report Item 15B
Risk Assessment for the year ended
June 30, 2022
Significant areas of focus
• Consider impact of current economic climate (COVID)
• Revenue recognition
• Accounts receivable and accrued revenue
• Test a sample of customer billings
• Relate total cash received during the year to revenue • Review revenue recognition through year-end and method for determining (accrued revenue)
• Cash
• Confirmations sent to financial institutions
Attachment Staff Report Item 15B
Risk Assessment for the year ended
June 30, 2022
Significant areas of focus
• Accrued Cost of Electricity
• Review subsequent bills from electricity providers and cash payments • Accrued REC expense
• Supplier Security Deposits
• Reviewed contracts and determined completeness of amounts recorded • Financial Statement Note Disclosures – Complete and without bias • Single Audit – Award of federal funds received through the CAPP program.
Attachment Staff Report Item 15B
Required Board Communications
• The significant accounting
policies adopted by EBCE
throughout the periods audited
appeared appropriate and
consistently applied.
• No alternative treatments of
accounting principles for material
items in the financial statements
were discussed with management.
Attachment Staff Report Item 15B
Required Board Communications
(continued)
• We did not identify any significant
or unusual transactions or
applications of accounting
principles where a lack of
authoritative guidance exists.
• We did not propose any adjustments
to the financial statements.
Attachment Staff Report Item 15B
• There were no disagreements with management concerning the scope of our audit, the application of accounting principles, or the basis for management’s judgments on any significant matters.
• We did not encounter any difficulties in dealing with management during the performance of our audit.
Required Board Communications
(continued)
Attachment Staff Report Item 15B
Brett Bradford: 707-577-1582
Questions?
Attachment Staff Report Item 15B