Fremont City Council Meeting: 04/18/23 07:00 PM
3300 Capitol Avenue Div/Dept: Finance Department
Fremont, CA 94538 Category: Presentations
SCHEDULED
Sponsors:
COUNCIL STAFF REPORT (ID # 4866) DOC ID: 4866
Updated: 4/12/2023 1:01 PM by Alberto Quintanilla Page 1 FISCAL YEAR 2021/22 FINANCIAL AUDIT - Transmittal and Acceptance of Fiscal Year 2021/22 Audit Reports
Contact Persons:
Name: Hein Hein Hein Myat David Persselin
Title: Accounting Manager Finance Director
Div/Dept: Finance Department Finance Department
Phone: 510-494-4602 510-494-4631
E-Mail: [email protected] [email protected]
Executive Summary: The independent audit of the City’s Annual Comprehensive Financial Report for the fiscal year ended June 30, 2022 by the certified public accounting firm of Macias Gini & O’Connell LLP was completed on December 23, 2022 and posted to the City website. The Single Audit Report, which is required for the City’s major federal programs, was completed by the auditor on March 29, 2023. In addition, there are other audits that the City is required to undergo; these are generally financial and compliance audits of different sources of funds that the City receives. All of these audits and procedures resulted in unmodified (“clean”) opinions from the City’s independent auditors. Staff recommends that the City Council receive and file the audit reports.
BACKGROUND: Best financial practices as well as various financing covenants and regulations associated with restricted funding sources require the City to prepare and publish a complete set of financial statements each year, prepared in conformance with generally accepted accounting principles (GAAP). These financial statements, referred to as the Annual Comprehensive Financial Report or “ACFR”, are also audited by a firm of licensed certified public accountants. The ACFR for the fiscal year ended June 30, 2022 has been prepared by the City and audited by the certified public accounting firm of Macias Gini & O’Connell LLP (MGO). The ACFR and audit of the City’s financial statements were completed and posted on the City’s website on December 23, 2022, with the link provided to the City Council.
MGO has issued an unmodified (“clean”) opinion on the ACFR, which states that the financial statements are presented fairly in all material respects. In addition to the opinion letter included in the ACFR document, MGO has prepared a separate Report to the City Council.
The purpose of the MGO Report is to communicate the scope of audit procedures performed, significant findings, and other information, such as any disagreements with management, audit adjustments, and significant estimates that are not communicated in the audited financial statements.
Following completion of the ACFR, it was submitted to the Government Finance Officers Association (GFOA) Certificate for Excellence in Financial Reporting program. The GFOA is a nationally recognized nonprofit professional association serving more than 20,000 finance professionals in the United States and Canada, and the Certificate of Achievement is the highest form of recognition in the area of governmental accounting and financial reporting.
Council Staff Report (ID # 4866) Meeting of April 18, 2023 Updated: 4/12/2023 1:01 PM by Alberto Quintanilla Page 2 In addition to the audit of the City’s financial statements and the MGO Report to the City Council, MGO also prepared a compliance report for each of the City’s major federal programs, the City’s internal controls over compliance, and the City’s schedule of expenditures of federal awards. This report, referred to as the Single Audit Report, is required under the audit provisions of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), which applies to all governments that expend $750,000 or more per fiscal year in federal grant awards. In FY 2021/22 the City’s federal expenditures totaled $61.1 million.
The Single Audit Report is specifically designed to assure federal grantor agencies from which the City receives funds that internal controls and compliance with the regulations are maintained, and that appropriate financial statements are properly prepared and submitted when due. The Single Audit Report was completed by MGO on March 29, 2023, with an unmodified opinion of compliance for all major grant programs and a finding of no material internal control weaknesses. If the auditors had found any material internal control weaknesses, they would have been required to report those directly to the City Council and to the federal government.
The FY 2021/22 audit and related reports indicate the City continues to have no material internal control weaknesses.
DISCUSSION/ANALYSIS: The City’s financial statements provide information about the finances of the City in its entirety, as well as information about individual funds. The ACFR is organized into the three sections summarized below.
Council Staff Report (ID # 4866) Meeting of April 18, 2023 Updated: 4/12/2023 1:01 PM by Alberto Quintanilla Page 3 Introductory Section
The Introductory Section includes the Letter of Transmittal, which is designed to complement the Management’s Discussion and Analysis (the “MD&A”) section, and should be read together to better understand the City’s financial position.
Financial Section
The Financial Section begins with the Independent Auditor’s Report, followed by the MD&A, which serves as an executive summary of the financial statements. Following the MD&A are the Government-Wide Financial Statements, which are designed to provide a broad overview of the City’s finances similar to a private sector business. These statements show the June 30, 2022 fiscal year balances and overall results of operations for all City fund s.
The Statement of Activities identifies functions of the City that are principally supported by taxes and those that receive program revenues. All of the City’s activities are considered to be governmental in nature, and, as a result, no business-type activities are reported in these statements. Governmental activities are those that are principally supported by taxes and program revenues. The governmental activities of the City include general government operations, police services, fire services, human services, capital assets maintenance and operations, recreation and leisure services, community development and environmental services, and interest on long-term debt.
Following the Government-Wide Financial Statements are Fund Financial Statements for all major and non-major funds of the City. A major fund is one of material significance and is determined through prescribed calculations. The General Fund is always considered a major fund by definition. Non-major funds are combined in the Fund Financial Statements for presentation purposes.
The fund-level statements are followed by the Notes to the Basic Financial Statements, which contain information on such topics as: Significant Accounting Policies, Cash and Investments, Capital Assets, Long-Term Obligations, Retirement Benefits, and Other Post- Employment Benefits (OPEB).
The Required Supplementary Information provides budgetary comparison schedules for the General Fund and the major special revenue funds, a discussion of the City’s approach to accounting for its street network infrastructure, schedules reporting changes in the net pension liability and pension contributions, and similar schedules for the net OPEB liability and OPEB contributions.
The Supplementary Section presents fund financial statements for the non-major governmental funds, the internal service funds, and the agency funds. It also includes financial statements for each of the programs constituting the Human Services Fund.
Statistical Section
The last section of the ACFR, which is unaudited, contains schedules of statistical data about the City of Fremont in five major categories: Financial Trends, Revenue Capacity, Debt Capacity, Demographic and Economic Information, and Operating Information. These schedules, generally covering a ten-year period, provide operating context for the financial data presented in the financial section of the ACFR.
Council Staff Report (ID # 4866) Meeting of April 18, 2023 Updated: 4/12/2023 1:01 PM by Alberto Quintanilla Page 4
The Annual Comprehensive Financial Report is available on the City’s Financial Information web page, and the ACFR opinion letter, the Report to the City Council, and the Single Audit Report are attached to this staff report. Copies are also available for review in the City Clerk’s Office and in the Finance Department.
FISCAL IMPACT: Unmodified audit reports and no material internal control weaknesses are an indication that City funds are being spent appropriately, as intended by the City Council and grantor agencies, and in compliance with federal and state laws. They also help maintain the City’s favorable bond ratings.
ENVIRONMENTAL REVIEW: None required.
LINK to Attachment:
• Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2022
ATTACHMENTS:
• 2022 ACFR Opinion Letter
• 2022 Single Audit Report
• 2022 Report to the City Council
RECOMMENDATION: Receive financial audit reports for Fiscal Year 2021/22 and file.