FINANCE &
AUDIT
COMMITTEE
MEETING
MARCH 27, 2023
Overview
Update on existing audits
Overview of the Risk Assessment process
2022 Annual Comprehensive Financial Report (ACFR)
2 MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
Update on Existing Audits3
MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
Airports Department: Scope Period - July 1, 2019 - January 31, 2022 Internal Audit conducted an initial review of the Airports Department’s process through the interviewing of management and staff, examining policies and procedures, and reviewing expenditures and contracts
Internal Audit recommended Airports Audit be revisited in a 12 -month period Wireless Communication: Scope Period - October 1, 2018 - June 30, 2021 Purpose: Assess adequacy of controls regarding wireless device assignment, oversight, and use
Total amount of wireless expenses to be audited : $4.3 million Overview of the Risk Assessment process
Department directors, and/or assistant directors and Council members complete a seven- question survey
Internal Audit Division streamlined the process; survey is delivered via Teams Forms for quick response and efficient tracking
Additional Characteristics used to conduct the risk assessment:
Full time employees
Budgeted revenues and budgeted expenses
One point adjustment based on years since division was audited Utilizing information from above, a risk assessment matrix generates the order and rank for each department and division
4FINANCE & AUDIT COMMITTEE MEETING
4 MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
Top 10 - Highest Risk Score
5 MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
Overview of the Risk Assessment process
Department Division Adjusted Risk
Score Rank 10ths
Public Utilities Water 87 10
Public Works Construction Management 86 10
Public Works Landscape Maintenance 85 10
Police Patrol 84 10
Public Utilities Solid Waste 84 10
Transportation Capital Projects/Operations 84 10
Public Utilities Wastewater Management 83 10
Transportation Support Services/Customer Experience 82 10 Planning & Development Long Range Planning 81 9
Planning & Development Building & Safety 81 9
6 MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
Work Plan
Item No. Risk Score Activity Group Audit Audit Objectives Status 1 55* Information Services Department - Administration Wireless devices audit Fieldwork 2 73 Finance Department - Administration Evaluation of Internal Controls RFP Interviews being conducted
3 56* PARCS - Administration TBD Not started
4 66 Airports - Administration Follow-up review Not started 5 78 Public Utilities – Water TBD Not started
6 77 Public Works - Construction Management TBD Not started Proposed Audit Work Plan - Fiscal Year 2023
* Audit was carried over into the current fiscal year because it was not completed by the end of FY 2022. The audit risk score is based on the FY 2023 Risk Assessment.
Overview of the Risk Assessment process
7 MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
2022 Annual Comprehensive Financial Report (ACFR)
What is the Annual Comprehensive Financial Report (ACFR)? A set of financial statements which conform to the
accounting requirements established by the
Governmental Accounting Standards Board (GASB)
The report must by audited by an independent auditor
using generally accepted government auditing standards
2022 ACFR = Covers the fiscal year ended June 30, 2022 8 MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
2022 Annual Comprehensive Financial Report (ACFR)
Financial Highlights (amounts in thousands)
General
Fund All Funds
Total Revenues $407,557 $1,152,777
Total Expenses $374,375 $927,471
Total Assets $171,644 $4,869,028
Total Liabilities $43,779 $1,588,277
Net Positions as of June 30, 2021 $102,943 $2,605,916 Net Positions as of June 30, 2022 $104,691 $2,831,222 9 MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
2022 Annual Comprehensive Financial Report (ACFR)
Auditor’s Responsibilities
Express an opinion on the financial statements – received the best opinion possible “unmodified”
Identity and assess risk of material misstatement – no misstatements Obtain understanding of internal controls – no significant deficiencies Evaluate appropriateness of accounting policies and presentation of financial statements – two financial statement findings 10 MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
2022 Annual Comprehensive Financial Report (ACFR)
New Accounting Standard(s)
Governmental Accounting Standards Board (GASB) Standard No. 87 “This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract.”
11 MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
2022 Annual Comprehensive Financial Report (ACFR)
Audit Results, Findings & Recommendations
Type of Opinion Results
Financial Statements Unmodified
Federal Compliance Unmodified
Financial Statement Finding 2022-001 Internal Control Over Financial Reporting “During the audit, as discussed in Note 15 to the basic financial statements, the City restated its beginning net position/fund balance of the government-wide governmental activities, the governmental funds and the custodial funds, in order to correct the previously reported financial statements to comply with the GASB Statement No. 84, Fiduciary Activities, that was required to be implemented as of the year ended June 30, 2021. The governmental activities beginning net position was restated by $3.9 million.” Management Response
Prior to GASB 84, custodial funds were not required to be included with the fiduciary fund statements.
Staff has since corrected and included it with reporting in FY 2022. Staff will ensure that future GASB statements are implemented in the year in which they go into effect and will be proactive to ensure sufficient time to adequately implement statement changes in the future. 12 MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
2022 Annual Comprehensive Financial Report (ACFR)
Financial Statement Finding 2022-002 Internal Control Over Preparation of Schedule of Federal Awards “During our review of the Schedule of Expenditures of Federal Awards (“Schedule”) provided by the City, we noted the City federal expenditures for the Emergency Rental Assistance Program, passed through the State of California in the amount of $12,239,896 were excluded in the schedule. We also noted federal expenditures in the schedule for the State and Local Fiscal Recovery Fund were understated by $14,391,754.”
Management Response
Emergency Rental Assistance Program funds are Federal resources passed through the State. Staff designated spending as State resources and therefore incorrectly omitted them from the Schedule.
However, amounts were spent in accordance with program requirements. State and Local Fiscal Recovery Funds, though spent in accordance with program requirements, were similarly omitted from the Schedule by mistake. The City has created a Grants Management Unit in Finance to ensure proper expenditure tracking and accounting procedures, in addition to monitoring compliance with Uniform Guidance.
13 Schedule of Federal Awards
ARPA – All Projects
14 Schedule of Federal Awards
ARPA – All Projects
15 MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
Schedule of Federal Awards: ARPA – Projects Changing Funds
16 MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
Schedule of Federal Awards: ARPA – Projects Changing Departments
17 MARCH 27, 2023 FINANCE & AUDIT COMMITTEE MEETING
Questions