DATE:
December 10, 2024
TO:
Adam Politzer, Interim City Manager
FROM:
Lilybell Nakamura, Acting Finance Director
Brian Moura, RGS (Finance Consultant)
SUBJECT:
Resolution Of The City Council Of The City Of Emeryville Accepting The Annual Comprehensive Financial Report And Associated Compliance Audit Reports And Auditor Correspondence For The Fiscal Year Ended June 30, 2024
RECOMMENDATION
Staff recommends that the City Council adopt the above-entitled resolution accepting the Annual Comprehensive Financial Report and associated compliance audit reports and auditor correspondence for the City of Emeryville for the fiscal year ended June 30, 2024, including the following:
Annual Comprehensive Financial Report
Child Development Center Compliance Audit
Auditor’s Communication Letter
Auditor’s Memorandum on Internal Control
Auditor’s Report on Appropriations Limit Calculation
BACKGROUND
Each year, the City contracts with an independent certified public accounting firm to conduct an audit of the City’s financial statements. In addition to the City’s general purpose financial statements which are included in the Annual Comprehensive Financial Report document, the City prepares various financial reports associated with the Emeryville Child Development Center. These financial reports are also reviewed during the audit process in compliance with certain local, state and federal reporting requirements.
At the completion of the annual audit process, the auditors issue three communication documents to the City Council – the Auditor’s Communication Letter, the Memorandum on Internal Control and the Appropriations Limit Compliance Letter. For the fiscal year ended June 30, 2024, the financial audit was conducted by the accounting firm of Maze & Associates. This was the fourth audit completed for the City by Maze & Associates under an agreement approved by the City Council in April 2021.
Discussion
The items presented for City Council review and acceptance include the Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2024, four additional compliance audit reports and three auditor communication documents. Each of these items is discussed below.
Annual Comprehensive Financial Report
The Annual Comprehensive Financial Report provides detailed information on the financial position of the City of Emeryville. The Annual Comprehensive Financial Report is organized into the following four sections:
Introductory Section
The Introductory Section (pages vii – xiii) includes the City Manager’s Transmittal Letter discussing the City’s profile, current economic condition and economic outlook, major accomplishments over the past year and information on internal and budgetary controls. Also included in the Introductory Section is a listing of City officials, organizational chart and City map.
Basic Financial Section
This is the key section of the Comprehensive Annual Financial report and includes:
Independent Auditor’s Report (pages 1-3) stating that the financial statements accurately reflect the City’s financial position.
Management’s Discussion and Analysis (pages 5-17) which provides highlights of the financial statements and an overview of the City’s activities and financial performance.
Basic Financial Statements (pages 19-120) for the fiscal year ended June 30, 2024, including balance sheets, income and cash flow statements and notes to the financial statements providing additional information on the City’s financial operations.
The audited financial statements provide information on the City’s funds separated by fund classification:
Governmental Funds including the General Fund, Grant Funds, Housing Assets Fund, Property Based Improvement District (PBID) Fund, General Capital Improvement Fund, Redevelopment Agency Bond Fund and other nonmajor governmental funds.
Proprietary Funds which account for those activities financed and operated in a manner similar to a private business enterprise including the Sewer Enterprise Fund and Internal Service Funds.
Fiduciary Funds which account for assets held by the City as a trustee or agent for individuals, other governmental units or other funds. Fiduciary Funds include the Successor Agency Private-Purpose Trust Funds and Assessment District Custodial Funds.
For the fiscal year ended June 30, 2024, the City’s main operating fund, the General Fund, recorded revenue of $52.1 million, expenditures of $51.9 million and net inter-fund transfers of $2.0 million which decreased the year-end fund balance by $1.9 million. The General Fund unassigned fund balance in combination with the economic uncertainty fund balance totaled $37.2 million of the General Fund’s total $65.3 million year-end fund balance.
Combining and Individual Fund Statements and Schedules
The Combining and Individual Fund Statements and schedules Section provides detailed financial information for the City’s nonmajor governmental funds including twenty-eight special revenue funds, nine capital project funds and two debt service fund (pages 121-182). Also included in this section of the Annual Comprehensive Financial Report are financial schedules for the City’s seven internal service funds (pages 183-189), and three private purpose trust funds (pages 191-193).
Statistical Section
The Statistical Section (pages 195-224) provides current and historical information on financial trends, revenue and debt capacity, demographic, economic and other operating data over a ten-year period.
Child Development Center Compliance Audit
A separate review of the financial statements of the Emeryville Child Development Center was completed. The auditors found no instances of noncompliance with laws, regulations, contracts and grant agreements. The auditors identified no audit findings or questioned costs charged to this program.
Auditor’s Communication Letter
Professional audit standards require that the auditors communicate directly with the City Council. In the Auditor’s Required Communication, Maze & Associates identifies two new required accounting policies which were implemented last fiscal year (GASB 87 and GASB 97). The auditors discuss certain accounting estimates required for the preparation of the financial statements and confirm that there were no material audit adjustments required, misstatements or disagreements with management to report. The auditors have issued an unmodified (clean) opinion on the City’s financial statements.
Auditor’s Memorandum on Internal Control
In the Memorandum on Internal Control, Maze & Associates confirm that there were no material deficiencies in internal control identified. The auditors did make two recommendations related to the timely reconciliation of payroll-related accounts and the diversification of the City’s investment portfolio. Staff has implemented both of these recommendations.
Appropriations Limit Calculation
In accordance with the provisions of the 1979 Gann Initiative (Proposition 4), the City Council annually approves an appropriations limit calculation. As part of the annual audit process, the auditors review and verify staff’s appropriations limit calculation. For the fiscal year ended June 30, 2024, the auditors have verified that the appropriations limit calculation is correct.
FISCAL IMPAct
None.
ADVISORY BODY REVIEW
The Budget and Governance Committee received a presentation from the independent auditors and reviewed the Annual Comprehensive Financial Report on December 3, 2024.
The Budget Advisory Committee received a presentation from the independent auditors and reviewed the Annual Comprehensive Financial Report on December 5, 2024.
PREPARED BY: Brian Moura, Finance Consultant
APPROVED AND FORWARDED TO THE
CITY COUNCIL OF THE CITY OF EMERYVILLE:
Adam Politzer, Interim City Manager
ATTACHMENTS
Draft Resolution
Exhibit A – Annual Comprehensive Financial Report
Exhibit B – Child Development Center Compliance Audit
Exhibit C – Auditor’s Communication Letter
Exhibit D – Auditor’s Memorandum on Internal Control
Exhibit E – Auditor’s Report on Appropriations Limit Calculation Financial Audit Reports
City Council Meeting | December 10, 2024
City of Emeryville
CALIFORNIA
MEMORANDUM