TITLE:
Receive Presentation on the Annual Comprehensive Financial Report (ACFR) for the Year Ended June 30, 2024, for the City of Fort Bragg and Consider Accepting the ACFR as Presented ISSUE:
As required by State and federal law, an independent audit of the City’s financial records must be performed on an annual basis. The financial records include those of the City of Fort Bragg (“City”) and its component unit, the Fort Bragg Municipal Improvement District No. 1 (“District”).
JJACPA, Inc., an independent audit firm, has performed and completed an audit review for the City and District. Copies of the reports will be forwarded to all federal, state, and banking entities as necessary.
The quality of the City’s financial reporting and the ACFR are measured in two ways: (1) an unmodified audit report by the independent auditors; and (2) the Certificate of Achievement for Excellence in Financial Reporting, awarded by GFOA. The attainment of the latter is the highest form of recognition in governmental accounting and financial reporting.
Auditors follow audit industry standards established by the American Institute of Certified Public Accountants (AICPA). These standards require auditors to provide an opinion on specific areas of the City’s financial statements based on observations, inquiries, testing of transactions, and analysis.
The City’s ACFR includes the following major sections and information:
Introductory Section
Letter of Transmittal – prepared by management and used to communicate information on areas that may impact the City’s finances now and in the future. This includes economic factors as well as budget and management factors.
Financial Section (the main body of the ACFR for current-year information) Independent Auditors’ Report – the City’s report card on the content of the ACFR Management’s Discussion and Analysis (MD&A) – provides an analytical overview of the City’s financial status and results for the year.
Basic Financial Statements – reports finances at a point in time (assets - liabilities) and throughout the year (revenues - expenditures) and cash flows.
City-Wide Statements – overview of financial information, including all of the City’s operations by the financial activity.
Fund Financial Statements – a detailed look at funds, reporting the Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balance.
Notes to the Financial Statements (Notes) – a narrative explanation accompanies the Basic Financial Statements.
Required Supplementary and Supplementary Information Sections Budget to Actual Comparisons – for all governmental funds with a legally adopted budget Notes to Required Supplementary Information
Pension Information – schedule of changes in the net pension liability and related ratios; schedule of contributions by plan OPEB Information – schedule of changes in the net Other Post-Employment Benefits (OPEB) liability and related ratios; schedule of contributions A breakout of individual non-major funds – for funds that were presented cumulatively in the Financial Section Statistical Section (current and historical information – up to 10 years) Financial Trends
Revenue Capacity Information
Debt Capacity Information
Demographic and Economic Information
Operating Information
The ACFR communicates the City’s financial condition and activity in a transparent and organized manner and compliance with accounting and financial reporting standards established by the Governmental Accounting Standards Board (GASB). The report presents historical and comparative information useful to City staff, elected officials, and external users such as debt rating agencies, businesses, other public agencies, and the City’s residents. The most recent ACFR and over ten years of prior year reports are available at the Library, the City’s Finance Department, and on the City’s Finance website at: https://city.fortbragg.com/208/Publications Discussion
The attached ACFR for FY 2023/24 has received an unmodified opinion from JJACPA. An unmodified opinion communicates that the financial statements are fairly presented and that the information used in the report is reliable. In their written communications to Council, the auditors note that they encountered no significant difficulties with management performing or completing the audit.
Statement on Auditing Standards (SAS) 114 establishes standards for the auditors’ communication with those charged with governance. SAS 115 provides guidance on communicating matters related to the City’s internal controls over financial reporting that have been identified in an audit of the financial statements. These statements require the auditors to consider and report on internal controls, significant audit findings, and other matters as prescribed in the standards related to the audit of the financial statements. The letters that satisfy the SAS requirements are attached to this report.
Furthermore, the City of Fort Bragg received the certificate of achievement for excellence in financial reporting award from the Government Finance Officers (GFOA) for FY 22/23 financial statements.
Below are some of the financial highlights for the Fiscal Year 2023-24.
The City's Net Position increased by $4.7 million (assets and deferred outflows of resources of the City exceed its liabilities and deferred inflows of resources) to $110 million as of June 30, 2024.
The Net position for governmental activities ended the year at $50.3 million, while the net position for business activities was $59.6 million. Of the $44.8 million in total governmental net position, a negative $424,308 was characterized as an unrestricted net position. In FY 2016, GASB 68 required all cities to recognize their pension liability as a deficit in unrestricted net position on their financial statements. The unrestricted position is now $5.6 million due to restructuring the City’s UAL with CALPERS.
Although the General Fund demonstrated strong revenue performance in FY 21/22, revenues declined in FY 2022/23. In FY 23/24, Transient Occupancy Tax (TOT) revenue decreased by 3% due to a poorly performing, wet winter; Sales Tax revenue remained flat; and Property Tax revenue increased by 5% as the County Assessor’s Office worked to catch up on assessments.
Reimbursement revenue increased by $618,405 from the prior year, primarily due to higher cost allocation reimbursements from the Water Fund, reflecting work on major Water projects in the Capital Improvement Program (CIP), including the Water Treatment Plant, Raw Water Line, and other improvements.
Miscellaneous revenues exceeded the budget by $982,000, largely due to a one-time adjusting journal entry. This adjustment was made to correct the City’s book balance during the transition from Excel-based bank reconciliations to the City’s integrated ERP system. Identified during the year-end closing process, the correction ensured accurate reporting of the City’s financial position.
General Fund expenditures totaled $10.5 million, coming in $450,000 below budget estimates. Expenditures decreased by $2.5 million from FY 2022/23 to FY 2023/24, largely due to a significant reduction in debt principal payments, partially offset by increases in general government and public safety spending. The positive budget variance was primarily driven by cost savings in personnel expenses, insurance, and retiree medical costs, offset by higher indirect costs paid to Enterprise Funds and Internal Service Funds.
The City's General Fund recorded a $2.9 million surplus for FY 2023/24, ending the year with a fund balance of $9.1 million (net of a $1.8 million restriction for the Section 115 Trust), reflecting a $3.2 million increase from the prior year.
The City's combined fund balance in its governmental funds stands at $9.1 million, which comprises various committed balances. These committed balances include:
Operating Reserve: A total of $1.9 million is allocated to the Operating Reserve.
Recession Reserve: $489,929 has been set aside for the Recession Reserve.
Litigation Reserve: holds $200,000.
Of this amount, $1.8 million has been invested in a Section 115 Trust. This investment serves as a buffer against potential future volatility with CalPERS.
The unassigned fund balance increased to $4.7 million.
Enterprise revenues for Water and Wastewater remained consistent with the previous year. Additionally, CV Starr's revenue has increased significantly by $600k since its reopening in 2021.
The Water Enterprise recorded a net position decrease of $81,000, while the Wastewater Enterprise saw a decrease of $36,000. Revenues for both enterprises remained relatively flat, with Water generating $3 million and Wastewater generating $3.6 million. The most significant draw on the net position for both enterprises was the non-cash expense of depreciation.
C.V. Starr enterprise revenues increased by $100k from an increase in membership fees and property tax increases, offset by depreciation of $675,919. Resulting in a $581k deficit. Total Net position is $20 million.
Total liabilities decreased by $512,312 during the fiscal year from scheduled debt payments and the payoff of water enterprise debt.
RECOMMENDED ACTION:
Accept, by motion, the Annual Comprehensive Financial Report as presented.
ALTERNATIVE ACTION(S):
Request for additional information.
ANALYSIS:
The Independent Auditor’s Report (pages 1-2) and highlights of Management’s Discussion and Analysis (pages 3-19) of the ACFR will be presented.
FISCAL IMPACT:
There is no fiscal impact with the presentation of this item.
IMPLEMENTATION/TIMEFRAMES:
Not applicable.
ATTACHMENTS:
City of Fort Bragg Annual Comprehensive Financial Report, Together with Independent Auditors’ Report for the Year Ended June 30, 2024 Auditor’s Communication Letter 2024
Representation Letter 2024
NOTIFICATION:
Joseph Arch, Brett Jones – JJACPA, Inc.
AGENDA ITEM NO. 8C
AGENCY: City CouncilMEETING DATE: April 28, 2025DEPARTMENT: Finance & AdminPRESENTED BY: Isaac WhippyEMAIL ADDRESS: [email protected] AGENCY: City CouncilMEETING DATE: April 28, 2025DEPARTMENT: Finance & AdminPRESENTED BY: Isaac WhippyEMAIL ADDRESS: [email protected] AGENCY: City Council
MEETING DATE: April 28, 2025
DEPARTMENT: Finance & Admin
PRESENTED BY: Isaac Whippy
EMAIL ADDRESS: [email protected]
AGENCY: City Council
MEETING DATE: April 28, 2025
DEPARTMENT: Finance & Admin
PRESENTED BY: Isaac Whippy
EMAIL ADDRESS: [email protected]
AGENDA ITEM SUMMARY