Agenda Report
Fullerton City Council
MEETING DATE: JULY 5, 2022
TO: CITY COUNCIL / SUCCESSOR AGENCY
FROM: ERIC J. LEVITT, CITY MANAGER
PREPARED BY: ELLIS CHANG, DIRECTOR OF ADMINISTRATIVE SERVICES
STEVEN AVALOS, BUDGET AND PURCHASING MANAGER
CINNDY BARRIOS, BUDGET ANALYST II
SUBJECT: THIRD QUARTER FINANCIAL REPORT FOR FISCAL YEAR 2021-22
SUMMARY
The Third Quarter Financial Report (Q3 Report) provides an overview of the City’s financial position through the third quarter of Fiscal Year (FY) 2021-22, comparing revenues and expenditures incurred from July 2021 through March 2022 against adopted budget levels and requests authority to ensure year-end budgetary and accounting compliance in preparation of the FY 2021-22 audited financial statements.
RECOMMENDATION
Receive and file Third Quarter Financial Report for Fiscal Year 2021-22.
Authorize City Manager, or designee, to effectuate any budget amendments and transfers necessary to ensure budgetary and accounting compliance in preparation of FY 2021-22 audited financial statements.
BUDGET POLICY PRIORITY STATEMENT
This item matches the following Budget Policy Priority Statement:
Fiscal and Organizational Stability.
FISCAL IMPACT
Staff does not request budget amendments at this time and anticipates the City to remain within adopted budget levels for the General Fund as well as all other funds in FY 2021-22. Staff will use the information provided in the Q3 Report to ensure continued budgetary diligence and compliance through the end of the fiscal year.
Staff will report any year-end budget amendments effectuated to ensure accounting and budget compliance in preparation of the City’s audited financial statements for FY 2021-22 to City Council with submission of the FY 2021-22 Annual Comprehensive Financial Report (AFCR) in December 2022 or January 2023.
DISCUSSION
Introduction
Staff provides quarterly financial reports to City Council as part of the City’s budget monitoring and financial reporting practices. This is a sound financial practice and fiscal transparency tool to report on the City’s ongoing fiscal condition, to identify and address any budget issues as they arise and to strengthen the City’s financial planning efforts. Quarterly reports provide a measurement of the City’s overall fiscal health and condition relative to adopted budget levels and keeps City Council informed and updated regularly on the City’s ongoing financial condition.
The FY 2021-22 Q3 Report is the last financial report before preparation of the City’s year-end audited financial statements to end FY 2021-22. The Q3 Report provides a good indicator of the City’s projected year-end performance for FY 2021-22 with 75% of the fiscal year completed and a majority of revenues and expenditures booked for the fiscal year. The FY 2021-22 Q3 Report identifies all revenues received and expenditures incurred through the third quarter of the fiscal year, from July 1, 2021 through March 31, 2022, in comparison to adopted budget levels.
The Q3 Report will focus on the General Fund, the City’s chief operating fund that supports traditional municipal services, such as public safety, community and economic development, parks and recreation and library community services and public works.
FY 2021-22 Q3 Review of General Fund (including Library and Parks and Recreation) General Fund revenues total $68.7 million through the third quarter of FY 2021-22 and are at 68.1% of adopted revenues of $100.9 million. General Fund expenditures total $73.4 million and are at 68.6% of adopted expenditures of $107.1 million.
Revenues
General Fund revenues total $68.7 million through the third quarter of FY 2021-22 and are at 68.1% of adopted revenues of $100.9 million. While revenues are at only 68% received to date, this is on par with where the City should be through the third quarter of the fiscal year.
Property tax provides the City’s largest revenue in the General Fund. The City receives its last two large installments of secured property taxes during the last quarter of the year (April and VLF in-lieu in May), which accounts for approximately 35%-40% of all property tax revenues. The City receives Sales Tax, the City’s second largest revenue, three months in arrears. Sales tax revenues received normally account for 70% through the third quarter of the fiscal year.
Property Tax revenues, through the first three quarters, total $30.1 million and are in line to meet and may exceed FY 2021-22 adopted budget levels of $48.9 million. Property Tax continues to provide the City’s most stable revenue and indicates the strong assessed valuation of Fullerton properties.
Sales Tax revenues total $16.6 million through the third quarter of FY 2021-22 and are in line to exceed adopted FY 2021-22 budget levels by $3.9 million and come in at $28.6 million, as reported at the Q2 or Mid-Year Report. These projections have not changed and increased sales tax is due to the City’s economic recovery from the pandemic, new businesses in the city and higher county pool allocations.
Transient Occupancy Tax, or TOT, revenues total $1.7 million through the third quarter and already totals $500,000 above adopted budget levels. Staff projects TOT to come in at $2.3 million in FY 2021-22.
All other revenues, such Charges for Services (Program Revenue) and Fines and Penalties, which include Parks and Recreation and Library fees have performed well through three-fourths of the year and staff anticipates them to remain in line with FY 2021-22 budgeted projections .
Expenditures
Expenditures occur in a more linear in fashion as the City processes payroll biweekly and processes invoices and bills on a weekly basis. General Fund expenditures total $73.4 million through the third quarter of FY 2021-22 and are at 68.6% of adopted expenditures of $107.1 million.
City Council approved an additional 2.5% in operating budget reductions in December 2021, which further reduced its General Fund budget target to $104.8 million in FY 2021-22. The City will achieve this in FY 2021-22 through Citywide vacancy savings, due to the high number of vacant positions across the organization. This results in General Fund expenditures currently in line within its $104.8 million General Fund budget goal to end FY 2021-22.
As the City approaches the end of the fiscal year, staff requests administrative budget authority to make any necessary budget adjustments to ensure year-end budgetary and accounting compliance for the FY 2021-22 year-end annual audit. Staff will present any material budget adjustments effectuated with submittal of the City’s audited financial statements or Q4 Financial Report.
Next Steps
Staff will present the last financial report for FY 2021-22 with the City’s annual audited financial statements, now known as the Annual Comprehensive Financial Report (ACFR), for FY 2021-22. Staff anticipates submitting the FY 2021-22 ACFR to City Council in December 2022 or January 2023, upon conclusion of the external year-end audit. Staff will submit the City’s final year-end position (final ending fund balances) and final comparison of year-end actuals against adopted and projected budget levels for FY 2021-22 with presentation of the ACFR.
Attachments:
Attachment 1 – Revenue Detail by Fund
Attachment 2 – Expenditure Summary by Fund and Department FY 2021-22 Third Quarter Financial Report
July 05, 2022 - Page 3