DATE: December 18, 2023
TO: Mayor and Members of the City Council President and Members of the Estero Municipal Improvement District (EMID) Board of Directors
VIA: Stefan Chatwin, City/District Manager
FROM: Edmund Suen, Finance Director
Waqas Hassan, Assistant Finance Director
DEPARTMENT: Finance
SUBJECT: RATIFYING AND APPROVING THE AUDITED FISCAL YEAR 2022-23 ANNUAL COMPREHENSIVE FINANCIAL REPORT
(ACFR) AND OTHER AUDIT COMPLIANCE REPORTS AND THE
FISCAL YEAR 2022-23 WARRANT REGISTERS IN THE FORM
OF THAT ACFR
RECOMMENDATION
It is recommended that the City Council/EMID Board of Directors adopt the attached resolutions ratifying and approving the Fiscal Year 2022-23 Annual Comprehensive Financial Report (ACFR) and other audit compliance reports and the Warrant Register in the Form of that ACFR in accordance with California Government Code Section 37208(c).
EXECUTIVE SUMMARY
Each year, City staff prepares an ACFR which includes financial statements and disclosures of the City/District’s financial position. While the residual effects of the COVID-19 pandemic continued to impact the City’s Transient Occupancy Tax (TOT), many of the other General Fund categories have now surpassed pre-pandemic revenue levels. Growth in property tax, including robust Educational Revenue Augmentation Fund (ERAF) receipts, the State's backfill of property tax in lieu of vehicle license fees (VLF), and better than expected sales tax revenues culminated in an overall positive
actual to budgeted revenue results. FY 2022-23 General Fund revenues and expenditures totaled $66.1 million and $48.6 million respectively, while Net Transfers Out was $3.47 million. Transfers Out included $3.50 million to the City’s Capital Improvement Projects Fund and $41,983 to the Housing Successor Fund for 20% of the loan repayment from the Successor Agency. Transfers-In to General Fund totaled $71,287 out of which $21,287 were from the Foundation Fund for the summer concerts and $50,000 from the Construction and Demolition Recycling Fund representing forfeiture of deposits. The expenditure savings were primarily from staff retirements/ separations and a very tight labor market, all of which contributed to many unfilled vacancies. This culminated in both employee services expenditure savings as well as supplies and contract services savings from the lack of personnel. The ending General Fund balance at 6/30/23 was $63.0 million, of which $58.6 million was unrestricted, which represents 100% of FY 2023-24 budgeted operating expenditures of $58.3 million. These financial results are largely consistent with the fourth quarter financial update that was presented by City staff to the City Council on November 6, 2023. The ACFR also includes an Independent Auditor’s Report from the City/District's external independent auditors, Badawi & Associates. They have provided an unmodified (clean) opinion on the FY 2022-23 City/District’s financial statements.
BACKGROUND AND ANALYSIS
Financial Condition
In addition to the ACFR, the auditors also prepared the following reports as part of their audit engagement with the City/District:
Report on compliance with the Agreement for Distribution of San Mateo County Measure A Funds for Local Transportation Purposes for the year ended June 30, 2023
Report on Compliance with the Agreement for Distribution of San Mateo County Measure W Funds for Local Transportation Purposes for the year ended June 30, 2023
Report on Agreed Upon Procedures Applied to Appropriation Limit Schedule for the year ending June 30, 2023
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 for the year ended June 30, 2023
Auditor’s Communication with Those Charged with Governance for the year ended June 30, 2023
As per the auditors’ recommendation, the City/District recorded prior period adjustments and, as a result, restated the beginning fund balance of the General Fund, Low and Moderate Income Housing Fund, and Foster City Affordable Housing Fund by $569,766, $87,044, and $4,023,577, respectively, to correct loans receivable accounting, which has previously been offset by a corresponding deferred inflow, rather than reporting is as part of the City/District’s fund balance. The City also recorded prior period adjustment to restate the beginning net position of Governmental Activities in the Government Wide Financial Statements by a net amount of $2,771,763 to include pension amounts related to the EMID’s proportionate share.
Notwithstanding, the City/District received provided an unmodified (clean) opinion on the FY 2022-23 City/District’s financial statements.
These reports are all available for public viewing on the City's website at:
https://www.fostercity.org/finance/page/budget-and-financial-reports.
The City/District was awarded its 30th consecutive Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association (GFOA) for its FY 2021-22 ACFR. Since the Certificate of Achievement is awarded annually, City staff will submit the FY 2022-23 ACFR for certificate consideration.
As part of the City's annual financial reports preparation process, the Audit Committee reviewed the draft ACFR and each of the above draft reports.
Warrant of Demands / CA Government Code Section 37208(c)
The California Government Code requires that all warrant of demands either be approved at the time of issuance by City Council resolution, or by “ratification and approval in the form of an audited comprehensive annual financial report.” The City Council adopted Minute Order No. 1041 in 2007, determining that it was in the best interest of the City/District’s financial operations to accept the latter form of approval through the ratification of the annual ACFR. The attached resolutions, upon approval by the City Council and EMID Board of Directors, will satisfy the requirements of California Government Code Section 37208(c).
California Environmental Quality Act
Not Applicable
FISCAL IMPACT
There is no fiscal impact associated with the City Council/EMID Board of Directors' adoption of the attached resolutions approving the ACFR and the expenditures in the ACFR in accordance with California Government Code Section 37208 (c)
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Innovation and Sustainability
ATTACHMENTS:
Attachment 1 - City Resolution
Attachment 2 - EMID Resolution