Agenda Report
Fullerton City Council
MEETING DATE: JULY 18, 2023
TO: CITY COUNCIL / SUCCESSOR AGENCY
FROM: ELLIS CHANG, DIRECTOR OF ADMINISTRATIVE SERVICES
PREPARED BY: STEVEN AVALOS, BUDGET AND PURCHASING MANAGER
CINNDY BARRIOS, BUDGET ANALYST II
SUBJECT: THIRD QUARTER FINANCIAL REPORT FOR FISCAL YEAR 2022-23
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) 2022-23, comparing revenues and expenditures incurred from July 2022 through March 2023 against adopted budget levels. The Q3 Report requests budget authority as the City approaches the end of the fiscal year to ensure year-end budgetary and accounting compliance in preparation for the FY 2022-23 audited financial statements.
RECOMMENDATION
Receive and file Third Quarter Financial Report for FY 2022-23.
Approve $1,743,289 budget appropriation from General Fund (Fund 10) fund balance to Police Department budget (Fund 10) to effectuate formal ratification of police safety groups’ Memorandum of Agreements (MOAs) approved in FY 2022-23.
Authorize City Manager, or designee, to effectuate future budget adjustments, as necessary, to ensure budgetary and accounting compliance in preparation for the FY 2022-23 audited financial statements.
CITY MANAGER REMARKS
None.
BUDGET POLICY PRIORITY STATEMENT
This item matches the following Budget Policy Priority Statement:
Fiscal and Organizational Stability.
FISCAL IMPACT
Staff will use the information provided in the FY 2022-23 Q3 financial report to ensure continued budgetary diligence and compliance to adopted budget levels through the end of the fiscal year.
The Q3 Budget Amendment will total $1,743,289 in General Fund expenditures to reflect City Council approved Memorandum of Agreements (MOAs) with the Police Officers’ Association (POA) Safety and Dispatch units and Police Management Association, which took effect subsequent to the FY 2022-23 Budget adoption. The Q3 Budget Amendment to the FY 2022-23 Budget will reflect the agreed upon provisions of the MOAs and align with projected year-end actuals.
Any year-end budget amendments effectuated by staff will ensure accounting and budget compliance in preparation for the City’s audited financial statements for FY 2022-23.
DISCUSSION
Introduction
Staff provides quarterly financial reports for the current year budget to City Council as part of the City’s budget monitoring and financial reporting practices. This provides 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 measure the City’s overall fiscal health and condition relative to adopted budget levels and keep City Council informed and updated regularly on the City’s ongoing financial condition.
The FY 2022-23 Q3 Report is the last financial report before preparing the City’s fiscal year-end audited financial statements to end FY 2022-23. The Q3 Report provides a good indicator of the City’s projected year-end performance for FY 2022-23, with 75% of the fiscal year completed and the majority of revenues and expenditures booked for the fiscal year. The FY 2022-23 Q3 Report identifies all revenues received and expenditures incurred through the third quarter of the fiscal year from July 1, 2022 through March 31, 2023, in comparison to adopted budget levels.
The Q3 Report primarily focuses 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, library, community services and public works.
FY 2022-23 Q3 Review of General Fund (including Library and Parks / Recreation) General Fund revenues total $72.6 million, representing 64% of $113.6 million adopted revenues through the third quarter of FY 2022-23. General Fund expenditures total $84.1 million, representing 73.5% of $114.3 million adopted expenditures.
Revenues
General Fund revenues total $72.6 million through three quarters of FY 2022-23, representing 64% of $113.6 million adopted revenues. The City has received 64% of budgeted revenues to date which typical and on par with the revenues City should have collected through three quarters of the fiscal year. The City typically receives its last two large installments of secured property taxes (April) and VLF in-lieu (May) during the last quarter of the year, which accounts for approximately 35% to 40% of all property tax revenues, the City’s largest General Fund revenue. The City receives Sales Tax, the City’s second largest revenue, three months in arrears. Sales tax revenues received normally account for 70% through three quarters of the fiscal year.
Property Tax revenues, through the third quarter, total $29.5 million and remain in line to meet, or may exceed, the $52.2 million adopted budget level in FY 2022-23. Property Tax continues to provide the City’s most stable revenue and indicates the strong assessed valuation of Fullerton properties.
Sales Tax revenues total $18.2 million through the third quarter of FY 2022-23 and remain in line to meet, and likely exceed, the $29.4 million adopted budget levels. The City’s economic recovery from the pandemic, new businesses in the city and higher county pool allocations account for the strong Sales Tax revenues.
Transient Occupancy Tax, or TOT, revenues total $1.9 million through the third quarter and represent 64.9% of adopted budget levels as more individuals and families travel and book hotels. Staff projects FY 2022-23TOT to come in at $2.9 million.
All other revenues, such as 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 still anticipates they will remain in line with budgeted projections for FY 2022-23. Development Permits, in particular, have outperformed adopted budget levels due to increased development projects within the City and cost recovery efforts as most development-related fees have full cost recovery.
Expenditures
Expenditures tend to remain more linear as the City processes payroll biweekly and invoices and bills weekly. General Fund expenditures total $84.1 million through the third quarter of FY 2022-23 and represent 73.5% of $114.3 million adopted expenditures. Overall, General Fund expenditures remain in line with adopted budget levels through Q3 of FY 2022-23.
City Council approved Memorandum of Agreements with the Police Officers’ Association Safety and Dispatch units and Police Management Association in July 2022 totaling $1.7 million, subsequent to the FY 2022-23 Budget adoption. Staff requests a General Fund budget appropriation to formally incorporate the agreed-upon provisions of the approved MOAs into the FY 2022-23 Budget. Staff does not anticipate expending the full $1.7 million this year as evidenced by the General Fund expenditure budget at 73.5% of adopted levels prior to the requested Q3 Budget Adjustment.
Lastly, staff requests administrative budget authority to make any necessary budget adjustments as the City approaches the end of the fiscal year to ensure year-end budgetary and accounting compliance for the FY 2022-23 year-end annual audit. Staff will present any material budget adjustments with submittal of City’s audited financial statements or Q4 Financial Report.
Next Steps
Staff will present the last financial report for FY 2022-23 with the City’s annual audited financial statements, now known as the Annual Comprehensive Financial Report (ACFR) for FY 2022-23 Staff anticipated submitting the FY 2022-23 ACFR to City Council in January or February 2024, upon conclusion of the external year-end audit to report on the City’s final year-end position for FY 2022-23.
Attachments:
Attachment 1 – Q3 FY 2022-23 Revenue Detail by Fund
Attachment 2 – Q3 FY 2022-23 Expenditure Summary by Fund and Department cc: City Manager Eric J. Levitt
FY 2022-23 Third Quarter Financial Report
July 18, 2023 - Page 3