Item 8.1: Audited Annual Comprehensive Financial
Report (ACFR) for Fiscal Y ear Ended 2022
Sarah Schoen, Director of Finance/Treasurer
Adrian Del Rio, Assistant Director, Finance Department
Stacey Tang, Finance Manager, Finance Department
Annual Comprehensive Financial
Report (ACFR) for Fiscal Y ear Ended
2022
Introduction to the ACFR and its Sections
New Governmental Accounting Standards Implemented
General Fund Reserves as of Fiscal Year Ended 2022
Recommend to Accept the Audited Annual Comprehensive
Financial Report for Fiscal Year Ended June 30, 2022
2 https://www.chulavistaca.gov/departments/finance/financi al-reports
Introduction
to ACFR
3 Compiles and prepares the annual financial report to provide interested parties with reliable information concerning the financial condition and results of operations for the City.
Purpose
The basic financial statements are audited by an independent certified public accounting firm as required by City Charter Section 1012Audited The financial statements have been prepared in accordance with Generally Accepted Accounting Principles (GAAP). Adheres to pronouncements of Governmental Accounting Standards Board (GASB). Allows for comparability between state and local governments.
Preparation
The firm of Lance, Soll & Lunghard, LLP has audited the basic financial statements of the City of Chula Vista and has issued their opinion that the statements present fairly, in all material respects, the financial position and the results of the operations of the City. An unmodified (“Clean”) opinion Results
Sections of the ACFR
1. Introductory Section
2. Financial Section
3. Statistical Section
4 Sections of the ACFR
1. Introductory Section
• Letter of Transmittal
• List of City Officials
• Organizational Structure
• GFOA Award
5 Sections of the ACFR
2. Financial Section
• Independent Auditors’ Report
• Management’s Discussion and Analysis (MD&A)
• Basic Financial Statements
• Required Supplementary Information (RSI)
6 Sections of the ACFR
3. Statistical Section
• Financial Trends
• Revenue Capacity
• Debt Capacity
• Demographic and Economic Information
• Operating Information
7 New
Governmental
Accounting
Standards
Implemented
GASB Statement No. 87, Leases:
Enhances the usefulness and comparability of financial statements among governments requiring lessees and
lessors to report leases using a single model.
Requires recognition of certain lease assets and
liabilities for leases that were previously classified as operating leases and recognizes inflows or outflows of
resources based on the payment provisions of the lease
contracts.
Lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is
required to recognize a lease receivable and deferred
inflow of resources.
8 General Fund Reserves
General Fund Reserve Funds Reserve
Target %
Current
Reserve %
Current
Reserve $
(in millions)
Target Met
General Fund Operating Reserves 15.00% 15.00% $ 27.3 Economic Contingency Reserves 5.00% 5.00% $ 9.1 Catastrophic Event Reserves 3.00% 1.45% $ 2.6 Pension Reserve Fund 15.00% 1.35% $ 2.5 9 Section 115 Trust Fund
Status Report
10 11
Actuals
FY2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Estimated Beginning Fund Balance
Estimated Fund Balance -$ 8,362,116$ 17,449,769$ 28,213,698$ 40,072,854$ 51,812,697$ Reserve Balance - 2,464,336 2,464,336 2,464,336 2,464,336 2,464,336 Total Estimated Fund Balance and Reserves -$ 10,826,452$ 19,914,105$ 30,678,034$ 42,537,190$ 54,277,033$ Inflows
City Contributions - Annual Projected
Savings from Issuance of POBs 8,287,643$ 9,929,907$ 10,848,629$ 11,976,156$ 11,892,443$ 12,513,429$ City Contributions - Pension Reserve Fund
(PRF) from Surplus Funds 2,464,336 - - - - - Trust Net Investment Activity 110,751 133,620 - - - - Total Inflows 10,862,730$ 10,063,527$ 10,848,629$ 11,976,156$ 11,892,443$ 12,513,429$ Outflows
Miscellaneous Plan UAL -$ (609,449)$ -$ -$ -$ -$ Safety Plan UA - (313,125) - - - - Trust Fees (36,278) (53,300) (84,700) (117,000) (152,600) (183,600) Total Outflows (36,278) (975,874) (84,700) (117,000) (152,600) (183,600) Net Inflows (Outflows) 10,826,452$ 9,087,653$ 10,763,929$ 11,859,156$ 11,739,843$ 12,329,829$ Estimated Ending Fund Balance
Estimated Fund Balance 8,362,116$ 17,449,769$ 28,213,698$ 40,072,854$ 51,812,697$ 64,142,525$ Reserve Balance 2,464,336 2,464,336 2,464,336 2,464,336 2,464,336 2,464,336 Total Estimated Fund Balance and Reserves 10,826,452$ 19,914,105$ 30,678,034$ 42,537,190$ 54,277,033$ 66,606,861$ City of Chula Vista Section 115 Trust (Book Value)
Projections
City of Chula Vista
Fiscal Year 2021/22 Financial Audit
www.lslcpas.com
Overview of the Audit
• LSL has been engaged by City of Chula Vista to perform a financial audit over the basic financial statements.
• Conducted over three weeks
– Interim audit was conducted week of June 27th
– Final audit was conducted weeks of October 24th and October 31st • Goal is to render an “opinion” on whether the amounts reported in the financial statements are reliable in all material respects.
www.lslcpas.com
Overview of the Audit
• What the Audit is Not:
– Primarily a search for fraud or misappropriation of assets. • Although we are required to be always be cognizant of and consider the possibility such things, they are not our primary goal. We are required to report on them if they are identified or brought to our attention during our audit.
– An evaluation of the operational results of an organization. • If we believe there is significant risk that the organization will fail financially within 12 months after reporting date, we will report on it. However, making judgment calls on normal year-over-year operating results (e.g., doing better or worse) is not within the scope of a financial audit. www.lslcpas.com
Audit Report
• Unmodified Opinion:
– Opinion was rendered on February 3, 2023
– The financial statements can be relied upon and are materially correct as of June 30, 2022 • Basis for Opinion:
– Generally accepted auditing standards
– Government Auditing Standards
www.lslcpas.com
Audit Report
• Responsibilities of Auditor:
– Obtain reasonable, not absolute, assurance that the financial statements are free from material misstatement due to fraud or error
– Exercise professional judgment and maintain professional skepticism – Identify risks of material misstatement and develop audit procedures to respond to the risks – Obtain and understanding of internal control in order to design audit procedures. – Evaluate appropriateness of accounting policies and estimates – Evaluate City of Chula Vista for going concern
www.lslcpas.com
Report on Internal Control and Compliance
• This report is required by Government Auditing Standards for the purpose of reporting significant deficiencies or material weaknesses in internal controls or material noncompliance with laws, regulations, grant agreements, bond covenants, contracts, etc. • No findings reported in fiscal year 2022.
www.lslcpas.com
Other Required Communication
• Significant Accounting Practices
– Change in accounting principle related to leases (GASB 87) – Management’s estimates of net pension liability and net OPEB liabilities • Significant or Unusual Transactions
– None to report
• Difficulties Performing Audit, Misstatements, or Disagreements with Management – None to report
www.lslcpas.com
Summary of Results
• Unmodified (“clean”) audit opinion was rendered.
• No internal control findings were identified.
• No material noncompliance with laws, regulations, grant agreements, and contracts were identified.
• No significant audit adjustments were required.
• No difficulties conducting audit or disagreements with management about accounting policies occurred.
Ryan Domino, CPA, Partner
[email protected]
James Butera, CPA, Manager
[email protected]
Recommended Action:
Accept the Audited Annual Comprehensive Financial Report for Fiscal Year Ended June 30, 2022