Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective 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.
City of Guadalupe’s Response to Findings
City’s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
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 effectiveness of the entity’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 entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Badawi & Associates, CPAs
Berkeley, California
June 22, 2023
2 REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON
INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE UNIFORM GUIDANCE
AND ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the City Council
of the City of Guadalupe
Guadalupe, California
Report on Compliance for Each Major Federal Program
Opinion on Each Major Federal Program
We have audited the City of Guadalupe, California (City)’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended June 30, 2022. The City’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.
In our opinion, the City, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2022.
Basis for Opinion on Each Major Federal Program
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 Title 2 U.S.
Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance 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 other 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 compliance for each major federal 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 over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the City’s federal programs..
3 To the Honorable Mayor and Members of the City Council of the City of Guadalupe
Guadalupe, California
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 or 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 the Uniform Guidance 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, misrepresentations, 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 of each major federal program as a whole.
In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the City’s compliance with the compliance requirements 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 compliance 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 the Uniform Guidance, 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 compliance 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 a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or 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 a federal program 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 a federal 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. 4 To the Honorable Mayor and Members of the City Council of the City of Guadalupe
Guadalupe, California
Our consideration of internal control over compliance was for the 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 weaknesses or significant deficiencies. Given these limitations, we did 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 have not been identified.
Our audit was not designed for the purpose of expressing an opinion 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 the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated June 22, 2023, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements.
The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements.
The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole.
Badawi & Associates, CPAs
Berkeley, California
June 22, 2023
5 City of Guadalupe
Schedule of Expenditures of Federal Awards
For the year ended June 30, 2022
Assistance
Listing Pass-through Program Subrecipient
Grantor Agency and Grant Title Number Number Expenditures Payment U.S. Department of Housing and Urban Development:
Passed through State of California
Community Development Block Grants/State's program
and Non-Entitlement Grants in Hawaii 14.228 17CDBG12099 1,921,427 $ 12,686 $ Community Development Block Grants/State's program
and Non-Entitlement Grants in Hawaii 14.228 20-CDBG-12089 11,262 11,262 COVID19 - Community Development Block Grants/State's
program and Non-Entitlement Grants in Hawaii 14.228 20CDBGCV100085 45,878 37,038 COVID19 - Community Development Block Grants/State's
program and Non-Entitlement Grants in Hawaii 14.228 20-CDBG-CV2-3-00015 70,978 38,833 Subtotal Community Development Block Grants 99,819 2,049,545 Total U.S. Department of Housing and Urban Development 99,819 2,049,545 U.S. Department of Transportation:
Formula Grants for Rural Areas and Tribal Transit Program Passed through State of California 20.509 64B021‐01692 69,557 - Total U.S. Department of Transportation 69,557 -
U.S. Department of the Treasury:
Direct
COVID19 - State and Local Fiscal Recovery Fund 21.027 n/a 341,327 - Total U.S. Department of the Treasury 341,327 -
Total Expenditures of Federal Awards $ 2,460,429 $ 99,819 See accompanying Notes to Schedule of Expenditures of Federal Awards. 6 City of Guadalupe
Notes to the Schedule of Expenditures of Federal Awards For the year ended June 30, 2022
A. Reporting Entity
The financial reporting entity consists of (a) the primary government, City of Guadalupe, California (City), (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the primary government is not accountable, but for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The component unit discussed below is included in the reporting entity because of its operational or financial relationships with the City.
x Guadalupe Public Financing Authority
Component units are legally separate organizations for which the elected officials of the primary government are financially accountable. In addition, component units can be other organizations for which the primary government’s exclusion would cause the reporting entity’s financial statements to be misleading or incomplete.
Separate financial statements for the Guadalupe Financing Authority are not prepared. There are currently no reportable financial transactions of the Authority.
B. Basis of Accounting
Funds received under the various grant programs have been recorded within the general, special revenue, and capital projects funds of the City. The City utilizes the modified accrual basis of accounting for the general, special revenue, and capital projects funds. Expenditures of federal awards reported on the Schedule of Expenditures of Federal Awards (Schedule) are recognized when incurred.
C. Relationship of Schedule of Expenditures of Federal Awards to Financial Statements The accompanying Schedule presents the activity of all federal financial assistance programs of the City.
Federal financial assistance received directly from federal agencies as well as federal financial assistance passed through the State of California is included in the Schedule.
The Schedule was prepared only from the accounts of various grant programs and, therefore, does not present the financial position or results of operations of the City.
D. Pass-Through Entities’ Identifying Number
When federal awards were received from a pass-through entity, the Schedule shows, if available, the identifying number assigned by the pass-through entity. When no identifying number is shown, the City determined that no identifying number is assigned for the program or the City was unable to obtain an identifying number from the pass-through entity.
E. Indirect Costs
The City did not elect to use the 10% de minimis indirect cost rate. 7 City of Guadalupe
Schedule of Findings and Questioned Costs
For the year ended June 30, 2022
Section I – Summary of Auditor’s Results
Financial Statements
Types of auditors’ report issued on whether financial statements audited were prepared in accordance with GAAP: Unmodified Internal control over financial reporting:
x Material weakness(es) identified? Yes
x Significant deficiency(ies) identified? Yes
Any noncompliance material to the financial statements noted No Federal Awards
Internal control over major programs:
x Material weakness(es) identified? No
x Significant deficiency(ies) identified? None noted
Type of auditor’s report issued on compliance for major programs Unmodified Any audit findings disclosed that are required to be reported in accordance with section 200.516(a) No
Identification of major programs:
Dollar threshold used to distinguish between type A and type B program $750,000 Auditee qualified as low-risk auditee under
section 200.520? No
8 City of Guadalupe
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2022
Section II – Current Year Findings
A. Financial Statement Audit
2022-001 – Insufficient Fund Balance in the General Fund and the Ability of the City to Continue as a Going Concern (Material Weakness)
Criteria:
General-purpose local governments, regardless of size, at a minimum should maintain an unrestricted budgetary fund balance in the general fund no less than 2 months of regular general fund operating revenues or regular general fund operating expenditures.
Condition:
The General Fund did not maintain a sufficient or adequate fund balance level to ensure continuity of operations as of June 30, 2022. The General Fund finished the year with a fund balance of $781,237 compared to a fund balance of $370,356 in the prior fiscal year. This balance represents 48 days of operating revenues and 45 days of operating expenditures. The fund balance in spendable form is $352,224. As of June 30, 2022 the General Fund owed internally to the Lighting and Assessment Fund and the Water Fund the amounts of $192,500 and $297,496, respectively. These interfund loans were made so that the General Fund could sustain its basic operations.
The aforementioned conditions have raised doubt about the City’s ability to continue as a going concern, as described further in Note 15 of the Basic Financial Statements.
Cause:
The City has either overspent its budget in the past or the budget was not balanced which led to overspending and the insufficient fund balance situation.
Effect:
Insufficient fund balances and decrease in revenues in the past have created a budget shortfall that requires continued cost cutting measures to reach a budget that will increase the fund balance to an acceptable level as well as provide the necessary revenues and financing for continued operations of the City. In addition, an insufficient General Fund balance puts the City in a vulnerable position in times of economic stress.
Recommendation:
We recommend the City continue to analyze all potential cost cutting measures and revenue sources, and review options to adhere to a budget plan for the General Fund and other funds to increase the fund balance, as well as provide continued financing for City operations.
Management Response:
In Fiscal year 2021-22 the General Fund balance increased by 278,727.81 from the prior year. The primary goal is to preserve reserves and accumulate reserves. The City’s revenue continues to increase as the Pasadera Development adds additional homes this fiscal year. The Escalante Meadows Development is also expected to increase Building Permit and related building construction fee revenues by fiscal year 2023. And the increase in Accessory Dwelling Units (ADU’s) will continue to bring in much need housing availability and property tax increase. Other revenues showing steady increases are Sales Tax with the new Measure N that was passed with the November 2020 election, 9 City of Guadalupe
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2022
Section II – Current Year Findings, continued
A. Financial Statement Audit, continued
2022-001 – Insufficient Fund Balance in the General Fund and the Ability of the City to Continue as a Going Concern (Material Weakness), Continued
Management Response (continued):
Property Tax with new development, Business License, Utility Users Tax and Franchise Fees. In addition, City Council is currently working on a Cannabis Program (2 retail stores and 1 processing and manufacturing) to the City soon all of which are in the entitlement phase. The City has received $1.8M from the American Rescue Plan Act in fiscal year 2021 and 2022 respectfully much of which is unspent but is budgeted for various projects and initiatives. Amid the pandemic, the City still needs to look at finding alternatives to sustain recurring revenue streams for the future to build strong reserves and to continue to provide residents with current services.
Moreover, in summary, over the years the City has made significant improvements to its financial condition. The fact that the City had reserves sufficient to cover the costs of storm impacts is a testament to these improvements. Looking at the General Fund it has been subsidized during the last two years with ARPA funding at about $600,00 per year. These funds will no longer be available after FY 24. The Public services, provided by the General Fund that seem to be most critical to the public are Public Safety Services and Parks and Recreation Facilities and Programing. These combined services account for 67% of the General Fund Budget. Cutting the costs of other Departments to ensure the maintenance of Public Safety/ Parks and Recreation programs is not viable.
The City Administrator is in the process of recommending an idea to look at augmenting the General Fund with either a parcel tax or the implementation of a Mello Roos Community Service Facilities District with proceeds from these sources used to augment the General Fund specifically for the delivery of Public Safety/ Parks and Recreation services. This recommendation deserves a detailed review. It would be a heavy lift. Both alternatives would require a 2/3 majority at the poll. Keep in mind the recent ballot measure to raise the Transient Occupancy Tax failed but by only 4 votes. The success of such a ballot measure would be dependent on the level of public education regarding the necessity of augmenting existing funding sources. In the event one of these revenue raising options is successful it would sole source the funding for critical services leaving the remainder of General Fund revenues to fund other core services.
2022-002 – Control Over Journal Entries and Financial Reporting (Significant Deficiency) Criteria:
A good internal control system over financial reporting requires that certain tasks such as creating journal entries and reviewing journal entries be segregated and not performed by the same individual.
Condition:
During our audit we noted that there was mainly one person who was responsible for creating journal entries with no direct or independent review of those entries by another person. We also noted journal entry errors during the audit.
10 City of Guadalupe
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2022
Section II – Current Year Findings, continued
A. Financial Statement Audit, continued
2022-002 – Control Over Journal Entries and Financial Reporting (Significant Deficiency), Continued
Cause:
Duties in the financial reporting system are not adequately segregated due to staffing limitations.
Effect:
Journal entries amounts may be misstated due to errors, and unauthorized entries may be posted and not detected timely.
Recommendation:
We recommend that the City update its procedures to ensure that journal entries are properly reviewed and reconciled independently and that there is adequate segregation of duties in place.
Management Response:
The city currently is working to implement policies and procedures to develop “best practice” measures. This process will be added into the Finance Policies and Procedures Manual currently in progress, expected completion by end of FY2023-24.
2022-003 –Deposits Payable (Significant Deficiency)
Criteria:
The City should have policies and procedures over accounting for deposits received by the City from third parties for and related disbursements.
Condition:
During performance of the audit, we were not able to obtain listings of balances by depositor for all deposit accounts held by the City as of the end of the fiscal year.
Cause:
The City does not currently have formal policies and procedures to account and reconcile all deposits held by the City.
Effect:
Liabilities reported for deposits held by the City may be misstated, and amounts returned to depositors may be inaccurately calculated.
Recommendation:
We recommend that the City develop policies and procedures over deposits held by the City, such as implementation review and reconciliation of the general ledger to information maintained by responsible departments.
11 City of Guadalupe
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2022
Section II – Current Year Findings, continued
A. Financial Statement Audit, continued
2022-003 –Deposits Payable (Significant Deficiency), Continued Management Response:
The tracking and reconciliation of building and planning deposits are in process of reconciliation and will be tracked and reconciled on a monthly basis to ensure accurate account of liability. This finding will be resolved before the end of our next FY audit.
2022-004 – Closing Policies and Procedures (Significant Deficiency) Criteria:
The City is responsible for fair presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America. In addition, an effective internal control system over financial closing and reporting provides reasonable assurance for the safeguarding of assets, the reliability of financial information, and compliance with laws and regulations.
The City’s financial closing process should include preparation of reconciliations for all significant accounts to be reported on the City’s financial statements.
Condition:
During the performance of the audit, we noted that there were accounts that needed to be updated for which reconciliations were not prepared, and as a result closing entries were recorded subsequent to the start of the audit.
Cause:
The City’s trial balance provided for the audit did not include all necessary adjustments needed to prepare the financial statements.
Effect:
Lack of checklists can result in the City making the same accounting mistake year over year. Lack of documentation also prevents an easier transition when there isn’t overlap between management employees.
Recommendation:
We recommend that the City update its closing procedures and closing checklist to encompass review and analysis of all balance sheet accounts and preparation of schedules to support the changes that occurred during the year and the balances reported at the end of the year in these accounts.
Management Response:
The City accepts the recommendation provided and will produce an adequate closing checklist and process in detail. This process will be added into the Finance Policies and Procedures Manual currently in progress, expected completion by end of FY2023-24.
12 City of Guadalupe
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2022
Section II – Current Year Findings, continued
A. Financial Statement Audit, continued
2022-005– Written Policies and Procedures over Grants (Significant Deficiency) Criteria:
The City is responsible for fair presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America. In addition, the City is responsible for compliance with terms and conditions for related grants received and expended by the City.
Condition:
During performance of the audit, there were difficulties encountered by City staff in obtaining information for federal grants, such as status of billings, amounts expended during the year, and who in the City was assigned responsibility for various grants.
Cause:
The City does not have formal written policies and procedures for grants.
Effect:
Lack of written policies and procedures in combination with turnover in personnel may result in noncompliance with grant terms and conditions, and hence increases the risk of related noncompliance financial contingencies.
Recommendation:
We recommend the City update policies and procedures over grants to improve internal controls over grant reporting and compliance. Such policies may include maintenance of a central inventory documenting all grants received by the City, responsible staff or consultant, and developing procedures for grant application, billing, reconciliation and closing.
Management Response:
The City currently is working to implement policies and procedures to develop “best practice” measures. This will help reconcile and track grants in coordination with capital improvement projects by using the talents of existing city staff to help augment grant monies set aside for administration and project management. City staff has set up a committee consisting of the Public Works Director, City Administrator, Finance Director, LADG, Royal Theater project manager and the Administrative Assistant in order to improve oversite of the grants and associated projects. This process will be added into the Finance Policies and Procedures Manual currently in progress, expected completion by end of FY2023-24.
B. Federal Award Program Audit
No current year federal award program audit findings.
13 City of Guadalupe
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2022
Section III- Prior Year Findings
A. Financial Statement Audit
2021-001 – Insufficient Fund Balance in the General Fund and the Ability of the City to Continue as a Going Concern (Material Weakness)
Criteria:
General-purpose local governments, regardless of size, at a minimum should maintain an unrestricted budgetary fund balance in the general fund no less than 2 months of regular general fund operating revenues or regular general fund operating expenditures.
Condition:
The General Fund did not maintain a sufficient or adequate fund balance level to ensure continuity of operations as of June 30, 2021. The General Fund finished the year with a fund balance of $370,356 compared to a fund balance of $485,622 in the prior fiscal year. This balance represents 28 days of operating revenues and 25 days of operating expenditures. The fund balance in spendable form is $27,757. As of June 30, 2021 the General Fund owed internally to the Lighting and Assessment Fund and the Water Fund the amounts of $240,000 and $368,996, respectively. These interfund loans were made so that the General Fund could sustain its basic operations.
The aforementioned conditions have raised doubt about the City’s ability to continue as a going concern, as described further in Note 15 of the Basic Financial Statements.
Cause:
The City has either overspent its budget in the past or the budget was not balanced which led to overspending and the insufficient fund balance situation.
Effect:
Insufficient fund balances and decrease in revenues in the past have created a budget shortfall that requires continued cost cutting measures to reach a budget that will increase the fund balance to an acceptable level as well as provide the necessary revenues and financing for continued operations of the City. In addition, an insufficient General Fund balance puts the City in a vulnerable position in times of economic stress.
Recommendation:
We recommend the City continue to analyze all potential cost cutting measures and revenue sources, and review options to adhere to a budget plan for the General Fund and other funds to increase the fund balance, as well as provide continued financing for City operations.
Management Response:
In fiscal year 2019-20, the General fund increased from prior year’s negative fund balance, ending the year at $485,622, from a negative $15,325. In fiscal year 2020-21, the fund balance decreased about $115,000. The primary goal is to preserve reserves and accumulate reserves. The City’s revenue continues to increase as the Pasadera Development adds additional homes this fiscal year. The Escalante Meadows Development is also expected to increase Building Permit and related construction fee revenues by fiscal year 2022. Other revenues showing steady increases are Sales Tax with the new Measure N that was passed with the November 2020 election, Property Tax with new development, 14 City of Guadalupe
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2022
Section III – Prior Year Findings, continued
A. Financial Statement Audit, continued
2021-001 – Insufficient Fund Balance in the General Fund and the Ability of the City to Continue as a Going Concern (Material Weakness), Continued
Management Response (continued):
Business License, Utility Users Tax and Franchise Fees. In addition, City Council is currently working on bringing Cannabis to the City in the near future. The City has received $99,777 from the CARES Act in fiscal year 2021 and will receive American Rescue Plan funds in fiscal year 2022. Amid the pandemic, the City still needs to look at finding alternatives to sustain recurring revenue streams for the future in order to build strong reserves and to continue to provide residents with current services. 2021-002 – Control Over Journal Entries and Financial Reporting (Significant Deficiency) Criteria:
A good internal control system over financial reporting requires that certain tasks such as creating journal entries and reviewing journal entries be segregated and not performed by the same individual.
Condition:
During our audit we noted that there was mainly one person who was responsible for creating journal entries with no independent review of those entries by an independent person. We also noted multiple journal entry errors that were both corrected and uncorrected.
Cause:
Duties in the financial reporting system are not properly segregated to ensure good checks and balances are in place.
Effect:
Journal entries amounts may be misstated due to errors not detected during the self-review process. In addition, unauthorized entries may be posted and not detected timely.
Recommendation:
We recommend that the City improve and strengthen its procedures for review and reconciliation to ensure that journal entries are properly reviewed and reconciled by an independent person and there is adequate segregation of duties in place.
Management Response:
Finance Director proposes journal entries and Business Manager reviews and enters the journal entries.
The City will review and set up controls to ensure approval controls of journal entries takes place for all changes to the accounting records. City Staff is hopeful that the new accounting software will accommodate workflow and authorization parameters to improve our controls and segregation of duties. In addition, the finance department will propose that the City Administrator review journal entries prior to posting.
15 City of Guadalupe
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2022
Section III – Prior Year Findings, continued
B. Federal Award Program Audit
No prior year federal award program audit findings.
16 Attachment 4
City of Guadalupe
Independent Auditor's Report
on
Agreed-Upon Procedures
Applied to Appropriations Limit Schedule
Fiscal Year July 1, 2021 through June 30, 2022
Guadalupe, California
Independent Accountants’ Report on
Agreed-Upon Procedures Applied to
Appropriations Limit Schedule
For the year ended June 30, 2022
INDEPENDENT ACCOUNTANTS’ REPORT
To the Honorable Mayor and City Council
of the City of Guadalupe
Guadalupe, California
We have performed the procedures enumerated below on the accompanying Appropriations Limit Schedule of the City of Guadalupe (City) for the fiscal year ended June 30, 2022. The City’s management is responsible for the accompanying Appropriations Limit Schedule.
The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of the requirements of Section 1.5 of Article XIII-B of the California Constitution. Additionally, the League of California Cities (as presented in the publication entitled Agreed-upon Procedures Applied to the Appropriations Limitation Prescribed by Article XIII-B of the California Constitution) has agreed to and acknowledged that the procedures performed are appropriate for their purposes. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.
The procedures performed and our findings are described below:
1. We obtained the completed worksheets used by the City to calculate its appropriations limit for the fiscal year ended June 30, 2022, and determined that the limit and annual calculation factors were adopted by resolution of City Council. We also determined that the population and inflation options were selected by a recorded vote of City Council.
Finding: No exceptions were noted as a result of our procedures.
2. For the accompanying Appropriations Limit Schedule, we added the prior year’s limit to the total adjustments, and agreed the resulting amount to the current year’s limit.
Finding: No exceptions were noted as a result of our procedures.
3. We agreed the current year information presented in the accompanying Appropriations Limit Schedule to corresponding information in worksheets used by the City.
Finding: No exceptions were noted as a result of our procedures.
4. We agreed the prior year appropriations limit presented in the accompanying Appropriations Limit Schedule to the prior year appropriations limit adopted by the City Council during the prior year.
Finding: No exceptions were noted as a result of our procedures.
To the Honorable Mayor and Members of City Council
of the City of Guadalupe
Guadalupe, California
We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the AICPA. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on the accompanying Appropriation Limit Schedule. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.
We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.
This report is intended solely for the information and use of the City Council and management of the City and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record, and its distribution is not limited.
Badawi & Associates, CPAs
Berkeley, California
June 20, 2023
2 City of Guadalupe
Appropriations Limit Schedule
For the year ended June 30, 2022
Amount Source
A. Appropriations limit for the year ended June 30, 2021 $ Prior year schedule 3,065,272 B. Calculation factors:
1. Population increase ratio 1.0503 State Department of Finance
2. Inflation increase ratio 1.0573 State Department of Finance
3. Total adjustment factor ratio 1.1105 B1 * B2
C. Annual adjustment increase 338,657 [(B3-1)*A)]
D. Other adjustments:
Loss responsibility (-) - N/A
Transfers to private (-) - N/A
Transfers to fees (-) - N/A
Assumed responsibility (+) - N/A
E. Total adjustments 338,657 (C+D)
F. Appropriations limit for the year ended June 30, 2022 $ 3,403,929 (A+E) 3 City of Guadalupe
Notes to Appropriations Limit Schedule
For the year ended June 30, 2022
1. PURPOSE OF LIMITED PROCEDURES REVIEW
Under Article XIIIB of the California Constitution (the Gann Spending Limitation Initiative), California governmental agencies are restricted as to the amount of annual appropriations from proceeds of taxes.
Effective for years beginning on or after July 1, 1990, under Section 1.5 of Article XIIIB, the annual calculation of the appropriations limit is subject to this agreed upon procedures engagement.
2. METHOD OF CALCULATION
Under Section 10.5 of Article XIIIB, for fiscal years beginning on or after July 1990, the appropriations limit is required to be calculated based on the limit for the fiscal year 1986-1987, adjusted for the inflation and population factors discussed in Notes 3 and 4 below.
3. INFLATION FACTORS
A California governmental agency may use as its inflation factor either the annual percentage change in the 4th quarter per capita personal income (which percentage is supplied by the State Department of Finance), or the percentage change in the local assessment roll from the preceding year due to the change of local nonresidential construction. The factor adopted by the City of Guadalupe for the fiscal year 2021- 2022 represents the percentage growth in the State of California per capita personal income.
4. POPULATION FACTORS
A California governmental agency may use as its population factor either the annual percentage change of the jurisdiction’s own population, or the annual percentage change in population in the County where the jurisdiction is located. The factor adopted by the City of Guadalupe for fiscal year 2021-2022 represents the population change for the City during calendar year 2020.
5. OTHER ADJUSTMENTS
A California government agency may be required to adjust its appropriations limit when certain events occur, such as the transfer of responsibility for municipal services to, or from, another government agency or private entity. There were no adjustments made for the fiscal year ended June 30, 2022. 4 Agenda Item No. 12
REPORT TO THE CITY COUNCIL OF THE CITY OF GUADALUPE
Agenda of July 11, 2023
___________________________________ _________________________________ Prepared by: Approved by:
Tegnear Butler, Human Resources Manager Todd Bodem, City Administrator SUBJECT: New Job Description and Classification of Finance Clerk, regular, part-time (non-benefit) position in the Finance Department
RECOMMENDATION:
That the City Council adopt Resolution No. 2023-64 approving the classification and job description for the regular, part-time Finance Clerk position in the Finance Department and authorizing staff to initiate recruitment.
BACKGROUND:
The operations-side of the Finance Department has been staffed with three (3) Clerks since the beginning of 2023. Prior to that, there were only two (2) full-time Account Clerks. A part-time (benefits eligible) Finance Clerk position was added in early 2023. The primary responsibilities for all three (3) Clerks are to handle utility billings and receive payments, accounts receivables; to include processing payments for building permits, franchise fees, and utility user tax; issuing and processing payments for business licenses; accounts payables; and other miscellaneous payments. In addition, there is the handling of monthly billing by manually billing for hydrant meter usage; mailing code enforcement letters and monitoring for 30-day payment; preparing notification and pre-collection letters, as required; and preparing miscellaneous quarterly and annual reporting as required by State and County agencies.
Guadalupe’s population has increased over these past 10 years resulting in an increase in residents requiring services with more and convenient hours provided by the Finance Department, as well as other departments. A number of city projects have occurred increasing the number of consultants, vendors, etc. the Accounts Payables function administers. It is estimated that the City’s utility customer base has increased by about 450 in 2022, with a continuing need for increased customer service even after hiring the third Finance Clerk earlier this year.
Tegnear Butler
DISCUSSION:
Utility billings go out around the first of each month. There are approximately 20 days for a resident to pay before being delinquent. While the City has implemented other ways for residents to pay besides coming to the Finance Department “counter,” about 55% come in and pay in cash, with 40% paying online and 5% paying via call-in. From the time of the billing to about two (2) weeks or so after, there is a flow of traffic with residents coming in to pay at the “counter.” But the heavy traffic flow is around the 19th and 20th of each month for residents making payments on time.
Having this new part-time Finance Clerk’s primary responsibility handling utility billing payments at the “counter” frees up the other three Clerks to handle other matters, such as call-ins for payments, preparing monthly billings, responding to concerns on billings, etc. It would also permit the Finance Window to be open and operated for at least 8 hours each business workday (9:30am – 5:30pm).
Many residents view the Finance Department’s “counter” as City Hall. When people ask if City Hall will be open on a certain day, they’re asking if the “counter” will be open. Focused attention on more and improved customer service has long been needed. The additional regular, parttime Finance Clerk (benefits ineligible) position will allow for the department to provide efficient, effective, and timely customer service to the City’s 9,000+ residents and will help to increase the “counter” hours of availability. In addition, implementation of the new accounting software will bring upon much change for employees and residents the extra help needed.
FISCAL IMPACT:
The proposed salary range for the new part-time Finance Clerk (benefits ineligible) position is SEIU salary grade 153, with a minimum of $19.578 to a maximum of $26.238. For a 20-hour (max) week schedule, the annual cost for this non-benefit position would be approximately $20,361 from the Enterprise Fund – 10 Water.
ATTACHMENTS:
1. Resolution No. 2023-64
2. Part-Time Finance Clerk (benefits ineligible) Job Description RESOLUTION NO. 2023-64
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GUADALUPE APPROVING THE
CLASSIFICATION AND JOB DESCRIPTION FOR THE REGULAR, PART-TIME FINANCE CLERK (NOT
BENEFIT ELIGIBLE) AND AUTHORIZING STAFF TO INITIATE RECRUITMENT FOR THIS POSITON WHEREAS, over the past ten years, the City’s population has increased with a resulting increase in the number of households to be provided utilities; and WHEREAS, the operations staff in the Finance Department providing services to Guadalupe residents did not increase from two Account Clerk positions until the beginning of 2023 when a third (part-time, benefits eligible) Finance Clerk position was added; and WHEREAS, with the increasing focus and ongoing attention for the Finance Department to service the increased number of households in the city, the current operations staff of three (3) Clerk positions is still insufficient for the Finance Department to meet its customers’ needs; and WHEREAS, this new regular, part-time Finance Clerk (not benefit eligible) position will primarily handle utility billings and cashiering responsibilities, whereas focused customer service is still needed after the hiring of a third part-time Finance Clerk (benefits eligible); and WHEREAS, the Accounting Supervisor will oversee this position and will report to the Finance Director; and
WHEREAS, SEIU Salary Range 153 has been established for this new/same position; and WHEREAS, upon adoption, this new position will allow for the continuing attention and focus for the Finance Department to service the residents and customers in an efficient, effective, and timely manner.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Guadalupe as follows:
SECTION 1: The City Council approves the classification and job description for the regular, parttime Finance Clerk position (benefits ineligible), attached to the staff report for this item.
SECTION 2: The City Council authorizes staff to initiate recruitment for this position.
SECTION 3: The City Clerk is hereby authorized to make minor changes herein to address clerical errors, so long as substantial conformance of the intent of this document is maintained. In doing so, the City Clerk shall consult with the City Administrator and City Attorney concerning any changes deemed necessary.
ATTACHMENT 1
PASSED, APPROVED AND ADOPTED at the regular meeting on the 11th day of July 2023 by the following vote:
MOTION:
AYES:
NOES:
ABSENT:
ABSTAINED:
I, Amelia M. Villegas, City Clerk of the City of Guadalupe, DO HEREBY CERTIFY that the foregoing Resolution, being Resolution No. 2023-64, has been duly signed by the Mayor and attested by the City Clerk, all at a regular meeting of the City Council, held July 11, 2023, and that same was approved and adopted.
ATTEST:
___________________________________ __________________________________ Amelia M. Villegas, City Clerk Ariston Julian, Mayor
APPROVED AS TO FORM:
_______________________________
Philip F. Sinco, City Attorney
CITY OF GUADALUPE
FINANCE CLERK
Part-Time (Less Than 20 Hours / Week)
June 2023
DEFINITION:
Under the direction of the Accounting Supervisor, or designee, this position performs a variety of clerical tasks, including, but not limited to primarily cashiering duties, filing, updating records and tracking transactions. The hours are scheduled based on the needs of the department.
ESSENTIAL FUNCTIONS:
• Customer service and cashiering duties relating to utility billing • Enters data for utility billing and other transactions • Transfers other financial data into Excel software
• Updates and maintains filing systems for utility billings • Reports errors, discrepancies and customer complaints to supervisor • Acts as back-up to staff for utility payments, accounts payables and other cash handling transactions
• May assist Business Manager on specific reports
• Other duties as may be assigned, related to other finance functions KNOWLEDGE/SKILLS:
• Verbal bilingual, Spanish, required; written, preferred • Basic data entry experience
• General mathematical skills related to cash handling
• Good understanding of filing systems
• Excellent interpersonal and communications skills
• Ability to provide excellent customer service
• Flexibility to work independently or on a team
EDUCATION & EXPERIENCE:
• High School diploma, or GED, required
• Minimum of 9 to 12 months of cashiering and customer service ATTACHMENT 2
Finance Clerk
Job Description
June 2023
PHYSICAL REQUIREMENTS:
The physical demands described here are representative of those that must be met by an employee to successfully perform the essential functions of this job. Reasonable accommodations maybe made to enable individuals with disabilities to perform the essential functions. • Frequently sits for extended periods of time. Occasionally stands for short durations of time and walks short distances.
• Occasionally reaches above, at, and below shoulder level. • Occasionally lifts, carries, pushes and pulls and materials and objects up to 10-15 pounds. • Frequently uses a computer and telecommunications equipment. • Visual acuity which could be corrected sufficiently to perform the essential functions of this position; average depth perception needed.
• Occasionally bends, stoops, kneels, handles, grips, grasps, extends neck upward, downward, or side-to-side.
• Ability to communicate to exchange information effectively verbally and to effectively hear and comprehend oral instructions and communications in an office environment.
WORK ENVIRONMENT:
The work environment characteristics described here are representative of those an employee encounters while performing the essential functions of this job. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. • Primarily works indoors with no exposures to inclement weather, conditions, or hazards. • The noise level in the work environment is usually quiet in the office. _____________________________________________________________________________________
GENERAL INFORMATION
SALARY RANGE: $19.578 to $26.238 per hour
BENEFITS: sick leave
HOW TO APPLY: Go to the City’s website at: www.ci.guadalupe.ca.us and download our application. Send to: City of Guadalupe, Attn: HR, P.O. Box 908, Guadalupe, CA 93434 OR Email to: [email protected]
DEADLINE DATE: Open Until Filled
EQUAL OPPORTUNITY EMPLOYER