CITY OF FULLERTON, CALIFORNIA
AIR QUALITY IMPROVEMENT TRUST FUND
FOR THE YEAR ENDED JUNE 30, 2023 AUDIT REPORT
CITY OF FULLERTON, CALIFORNIA
Air Quality Improvement Trust Fund
Audit Report
For The Year Ended June 30, 2023
CITY OF FULLERTON, CALIFORNIA
Air Quality Improvement Trust Fund
Audit Report
For The Year Ended June 30, 2023
Table of Contents
Page
Number
Independent Auditors’ Report ..................................................................................................................................... 1
Financial Statements
Balance Sheet/Stateme nt of Net Position ............................................................................................................ 4
Statements of Revenues, Expenditures and
Changes in Fund Balance/ Statement of Activities ............ ............................................................................... 5
Notes to Financial Statements ................................ ............................................................................................. 6
Required Supplementary Information
Budgetary Compari son Schedule ........................................................................................................................ 8
Independent Auditors’ Report on Compliance with Applicable Requirements and on Internal Control Over Compliance .......................................................................................... 9
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 .......................................................... 11
1611 E. Fourth Street, Suite 200
Santa Ana, CA 92701
(714) 569-1000
203 N. Brea Blvd, Suite 203
Brea, CA 92821
(714) 672-0022
21 Waterway Avenue, Suite 30089
The Woodlands, TX 77380
(936) 828-4587
2151 River Plaza Dr., Suite 150
Sacramento, CA 95833
(916) 503-9691
24422 Avenida de la Carlota, Suite 275
Laguna Hills, CA 92653
(949) 829-8299
www.lslcpas.com
INDEPENDENT AUDITORS’ REPORT
To the Hono
rable Mayor and Members of the City Council
City of Fullerton, California
Report on th
e Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of the Air Quality Improvement Trust Fund (the “Fund”), a special revenue fund of the City of Fullerton (the “City”), as of and for the year ended June 30, 2023, and the related notes to the financial statements, as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Fund of the City as of June 30, 2023, and the changes in its financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial State ments section of our report. We are required to be independent of the City and to meet our other ethical responsib ilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Emphasis of Matter
As discussed in Note 1, the financial statements present only the Fund and do not purport to, and do not, present fairly the financial position of the City as of June 30, 2023, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accou nting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to is sue an auditor’s report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted a uditing standards and Government Auditing Standards will always detect a material m isstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material
To the Honorable Mayor and Members of the City Council
City of Fullerton, California
if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted au diting standards and Government Auditing Standards, we:
Exercise professional judgment and maintain professional skept icism throughout the audit.
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to th ose risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of inter nal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States o f America require that the budgetary comparison schedule be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of fin ancial reporting for placing the basic financial statements in an appropriate operational, economic, or historic al context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of m anagement about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Management has omitted the management’s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial stateme nts, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of fi nancial reporting for placing the basic financial statements in an appropriate operational, economic, or historic al context. Our opinion on the basic financial statements is not affected by this missing information. 2 To the Honorable Mayor and Members of the City Council City of Fullerton, California
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December 19, 2023, on our consideration of the City’s internal control over the Fund‘s financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of intern al control over financial reporting and compliance and the results of that testing, and not to provide an opinion on t he effectiveness of the City’s internal control over the Fund‘s financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s inter nal control over the Fund‘s fin ancial reporting and compliance.
Brea, California
December 19, 2023
3 CITY OF FULLERTON
AIR QUALITY IMPROVEMENT TRUST FUND
Balance Sheet / Statement of Net Position
June 30, 2023
Reclassification
Governmental and Statement
Funds Eliminations of Net Position
Assets:
Cash 984,207$ -$ 984,207$ Accrued interest 5,506 - 5,506 Capital assets, net of depreciation - 47,114 47,114 Total Assets 989,713$ 47,114$ 1,036,827$ Fund Balance/Net Position:
Invested in Capital Assets -$ 47,114 47,114$ Restricted for AQMD activities 989,713 - 989,713 Total Fund Balance/Net Position 989,713 47,114$ 1,036,827$ Total Liabilities and Fund Balance 989,713$
4 CITY OF FULLERTON
AIR QUALITY IMPROVEMENT TRUST FUND
Statement of Revenues, Expenditures and
Changes in Fund Balance / Statement of Activities
For the Year Ended June 30, 2023
Governmental Statement
Funds Adjustments of Activities
Revenues:
Intergovernmental 137,942$ -$ 137,942$ Use of money and property 12,739 - 12,739 Total Revenues 150,681 - 150,681 Expenditures:
Current:
Community development 5,026 13,801 18,827 Total Expenditures 5,026 13,801 18,827 Excess (Deficiency) of Revenues
Over (Under) Expenditures 145,655 (13,801) 131,854 Other Financing Sources (Uses):
Transfers out (200,000) - (200,000) Total Other Financing Sources (Uses) (200,000) - (200,000) Net Change in Fund Balance/Net Position (54,345) (13,801) (68,146) Fund Balance/Net Position - Beginning 1,044,058 60,915 1,104,973 Fund Balance/Net Position - Ending 989,713$ 47,114$ 1,036,827$ 5 CITY OF FULLERTON
AIR QUALITY IMPROVEMENT TRUST FUND
Notes to Financial Statements
For the Fiscal Year Ended June 30, 2023
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLI CIES
A. Basis of Accounting
The accompanying financial statements for the Air Quality Improvement Trust Fund of the City of Fullerton, California have been prepared on the modified accrual basis of accounting. Generally, revenues are recognized when they become "susceptible to accrual", that is, measurable and availa ble to finance expenditures of the current period.
Revenues susceptible to accrual include motor vehicle fees and interest earnings on investments received within 60 days of year end. Expenditures are recognized when the fund liability is incurred, if measurable.
B. Measurement Focus
The Air Quality Improvement Trust Fund is accounted for on a spending or "financial flow" measurement focus. This means that generally only current assets and current liabilities are included on the balance sheet/statement of net position. The statement of revenues, expenditures and changes i n fund balance/statement of activities for the Air Quality Improvement Trust Fund generally presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets.
C. Air Quality Impro vement Trust Fund
California Assembly Bill 2766 (SHER) authorizes air pollution control districts to levy fees on motor vehicles. Fees are to be used to reduce air pollution. Under this program, the Department of Motor Vehicles collects the fees and subvenes the amounts to the South Coast Air Quality Management District for vehicles registered in the South Coast District. Forty cents of every dollar subvened to SCAQMD is allocated to the cities and counties in the South Coast Air District proportionately based upon population. The amounts attributable to the City of Fullerton are maintained in a special revenue fund administered by the City of Fullerton.
The accompanying financial statements present only the Air Quality Improvement Trust Fund of the City and do not include any other funds of the City. The City has issued its Basic Financial Statements under a separate cover and are available at City Hall.
D. Fund Balance
Fund balance is reported by the following fund balance classifications:
Nonspendable include amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact.
Restricted include amounts that are constrained on the use of r esources by either (a) external creditors, grantors, contributors, or laws of regulations of other governments or (b) by law through constitutional provisions or enabling legislation.
Committed include amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest authority, City Council. The formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is resolution or ordinance.
6 CITY OF FULLERTON
AIR QUALITY IMPROVEMENT TRUST FUND
Notes to Financial Statements
For the Fiscal Year Ended June 30, 2023
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLI CIES (CONTINUED)
Assigned include amounts that are constrained by the government’s intent to be used for specific purposes but are neither restricted nor committed. The Director of Administrative Services is authorized to assign amounts to a specific purpose, which was established by the governing body in resolution.
Unassigned include the residual amounts that have not been restricted, committed, or assigned to specific purposes.
The entire fund balance/net position of the Air Quality Improvement Trust Fund has been classified as restricted fund balance since the external resource provider, SCAQMD, requires the motor vehicle fees to be used only to reduce air pollution.
NOTE 2: CASH AND INVESTMENTS
The Air Quality Improvement Trust Fund cash balance is pooled with the City of Fullerton’s cash and investment in order to generate optimum interest income. Each fund's share of the pooled cash account is separately accounted for, and investment income is allocated to all participating funds b ased on the relationship of their average daily cash balances to the total of the pooled cash and investments. Information regarding the authorized types of deposits and investments, the type of risks (i.e. credit, interest rate, custodial, etc.) and other disclosures associated with the City's pooled cash and investments is included in the City's basic financial statements.
NOTE 3: CAPITAL ASSETS
Capital assets activity for the year ended June 30, 2023, was as follows:
Beginning Ending
Balance Increase Decrease Balance
Capital assets being depreciated:
Improvements other than buildings 152,287$ -$ -$ 152,287$ Total Capital Assets
Being Depreciated 152,287 - - 152,287 Less accumulated depreciation for:
Improvements other than buildings 91,372 13,801 - 105,173 Total Accumulated
Depreciation 91,372 13,801 - 105,173 Governmental Activities
Capital Assets, Net 60,915$ (13,801)$ -$ 47,114$
7 CITY OF FULLERTON
AIR QUALITY IMPROVEMENT TRUST FUND
Budgetary Comparison Schedule
For the Year Ended June 30, 2023
Variance with
Final Budget
Budget Amounts Actual Positive
Original Final Amounts (Negative)
Revenues:
Intergovernmental 181,000$ 181,000$ 137,942$ (43,058)$ Use of money and property 15,600 15,600 12,739 (2,861) Total Revenues 196,600 196,600 150,681 (45,919) Expenditures:
Current:
Community development 38,050 38,050 5,026 33,024 Capital outlay 265,000 265,000 - 265,000 Total Expenditures 303,050 303,050 5,026 298,024 Excess (Deficiency) of Revenues
Over (Under) Expenditures (106,450) (106,450) 145,655 252,105 Other Financing Sources (Uses):
Transfers out - (208,748) (200,000) 8,748 Total Other Financing Sources (Uses) - (208,748) (200,000) 8,748 Net Change in Fund Balance (106,450)$ (315,198)$ (54,345) 260,853$ Fund Balance - Beginning 1,044,058
Fund Balance - Ending 989,713$
8 1611 E. Fourth Street, Suite 200
Santa Ana, CA 92701
(714) 569-1000
203 N. Brea Blvd, Suite 203
Brea, CA 92821
(714) 672-0022
21 Waterway Avenue, Suite 30089
The Woodlands, TX 77380
(936) 828-4587
2151 River Plaza Dr., Suite 150
Sacramento, CA 95833
(916) 503-9691
24422 Avenida de la Carlota, Suite 275
Laguna Hills, CA 92653
(949) 829-8299
www.lslcpas.com
INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE
AND ON INTERNAL CONTROL OVER COMPLIANCE
To the Honorable Mayor and Members of the City Council
City of Fullerton, California
Repor
t on Compliance
Opinion
We have audited the Air Quality Improvement Trust Fund (the “Fund”) of the City of Fullerton, California (the “City”)’s compliance with the types of compliance requirements identified as subject to audit in California Assembly Bill 2766, Chapter 1705 (44220 through 44247) (“AB 2766”) that could have a direct and material effect on the City’s AB 2766 Subvention Fund Program (the “Program”) for the year ended June 30, 2023.
In our opinion, the City complied, in all material respects, wi th the types of compliance requirements referred to above that could have a direct and material effect on the Program for the year ended June 30, 2023.
Basis for Opinion
We
conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of AB 2766. Our responsibilities under those standards and AB 2766 are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report.
We are required to be independent of the City and to meet our o ther ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on complianc e for the Program. Our audit does not provide a legal determination of the City’s compliance with the compliance requirements referred to above.
Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control o ver compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the Program.
Auditor’s Responsibilities for the Audit of Compliance
Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud o r error, and express an opinion on the City’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards, Government Auditing Standards, and AB2766 will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresent ations, or the override of internal control.
Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City’s compliance with the requirements the Program as a whole.
To the Honorable Mayor and Members of the City Council
City of Fullerton, California
In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and AB 2766, we:
Exercise professional judgmen t and maintain professional skepticism throughout the audit.
Identify and assess the risks of material noncompliance, wheth er due to fraud or error, and design and perform audit procedures responsive to those risks. Such proced ures include examining, on a test basis, evidence regarding the City’s compliance with the compliance re quirements referred to above and performing such other procedures as we considered necessary in the circumstances.
Obtain an understanding of the City’s internal control over co mpliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with AB 2766, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over compliance. Accordingly, no such opinion is expressed.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit.
Report on Internal Control over Compliance
A deficiency in internal control over compliance exists when the design or operation of a control over complian ce does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of the Program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of the Pr ogram will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of the Program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for t he limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknes ses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we d id not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified.
Our audit was not designed for the purpose of expressing an opi nion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of AB 2766. Accordingly, this report is not suitable for any other purpose.
Brea, California
December 19, 2023
10 1611 E. Fourth Street, Suite 200
Santa Ana, CA 92701
(714) 569-1000
203 N. Brea Blvd, Suite 203
Brea, CA 92821
(714) 672-0022
21 Waterway Avenue, Suite 30089
The Woodlands, TX 77380
(936) 828-4587
2151 River Plaza Dr., Suite 150
Sacramento, CA 95833
(916) 503-9691
24422 Avenida de la Carlota, Suite 275
Laguna Hills, CA 92653
(949) 829-8299
www.lslcpas.com
INDEPENDENT AUDITORS’ 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
To the Hono
rable Mayor and Members of the City Council
City of Fullerton, California
We
have audited, in accordance with the auditing standards gene rally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Air Quality Improvement Trust Fund special revenue fund of the City of Fu llerton, California (the “City”), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Fund’s basic financial statements, and have issued our report thereon dated December 19, 2023.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over the Fund’s financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allo w management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements, on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely b asis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less s evere than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal contr ol that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Fund’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, including the require ments of California Assembly Bill 2766, Chapter 1705 (44220 through 44247), noncompliance with which could have a direct and material effec t on the financial statements. However, providing an opinion on compliance with those provisions was not an objec tive of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
To the Honorable Mayor and Members of the City Council
City of Fullerton, California
Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the e ffectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s inter nal control and compliance. Acco rdingly, this communication is not suitable for any other purpose.
Brea, California
December 19, 2023
12