REQUIRED AUDIT
COMMUNICATIONS
Honorable Mayor and City Council
City of Huntington Beach
Huntington Beach, California
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 of
Huntington Beach
for the year ended
June 30, 202
1 .
Professional standards require that we
provide you with information about our responsibilities under generally accepted auditing standards
,
Government Auditing Standards
and the Uniform Guidance
,
as well as certain
information related to the planned
scope
and timing of our audit. We have communicated
such information in our letter to you dated
June 17
,
202
1. Professional
standards also
require that we communicate to you the following information related to our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by
the City of Huntington Beach
are described in Note
1 to the financial statement
s.
The City implemented Governmental Accounting Standards
Board (GASB) Statement No. 84 related to Fiduciary Activities
and GASB Statement No. 98
that changed the name of the
Comprehensive Annual Financial Statements
to the
Annual
Comprehensive Financial S
tatements
.
We noted no transactions entered into by
the City of
Huntington Beach
during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper p
eriod.
Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected.
The most
sensitive estimate
s
affecting the City of Huntington Beach’s financial statements were:
Judgments
involving the estimated useful lives and depreciation methodology used for capital assets, including certain infrastructure . We evaluated
management’s judgments for reasonablen
ess.
Judgments as to which City capital projects should be capitalized and depreciated in the government
-
wide financial statements and proprietary funds
. We
evaluated management’s judgments for reasonableness.
Judgments relating to the collectability of ac
counts and notes receivable
. We
evaluated management’s judgments for reasonableness.
Judgments with respect to recording claims payable and remediation obligations .
We evaluated management’s judgments for reasonableness.
Judgments involving calculation of the pension liability. We evaluated the actuarial valuation report supporting the calculations. Judgments involving the calculation of the other post-employment benefit (OPEB) liability. We evaluated the actuarial valuation report supporting the calculatio ns.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected those misstatements.
We recorded material adjustments to the fiduciary funds related to the implementation of GASB 84. Additionally, the following immaterial misstatements detected as a result of audit procedures were not corrected by management:
recording LAIF and OCIP investments at fair value,
recording prior year adjustment to allocate interest to the Pension Liability debt service fund,
recording the bond premium and deferred refunding charge on the 2020 Lease Revenue Bonds, and
reclassification of operating expenses to change in joint venture investment in the nonoperating section of the Water Fund.
Management believes these adjustments are not material, either individually or in the aggregate, to each opinion unit’s financial statements taken as a whole.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management representation letter dated December 16, 2021.
Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the City of Huntington Beach’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with managemen
t each year prior to retention as
the City of
Huntington Beach
’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.
Other Matters
We applied certain
limited procedures to
management’s discussion and analysis,
budgetary
comparison information for the General Fund and each major special revenue fund, schedule of funding progress, schedule of changes in net pension liability and related ratios, schedule
of pension contributions, schedule of money
-
weighted rate of return, schedule of changes in
net OPEB liability and related ratios and schedule of OPEB contributions , which are required
supplementary information (RSI) that supplements the basic fin ancial statements. Our
procedures consisted of inquiries of management regarding 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 did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
We were engaged to report on supplementary information, which accompany the financial
sta
tements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles
generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supp lementary
information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.
We were not engaged to report on
introductory section
and the
statistical section
, which
accompany the financial
statements but are not RSI. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.
Restriction on Use
This
information is intended solely for the information and use of
the City Council
and
management of
the City of Huntington Beach
and is not intended to be, and should not be,
used by anyone other than these specified parties.
Irvine, California
December 1
6 , 202
1 Independent Auditor’s Report on
Internal Control Over Financial Reporting
and on Compliance and Other Matters Based on an Audit of the Air Quality
Special Revenue Fund
Performed
in Accordance
w
ith
Government Auditing Standards
City
Council
City of Huntington Beach
Huntington Beach, California
We have audited, in accordance with the 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, Air Quality
Management District Fund of the City of
Huntington Beach
, California
, as of and for the
year
ended
June 30, 20
2 1
, and the related notes to the financial state
ments, which collectively
comprise
the Air Quality Management District Fund of the City of Huntington Beach
’s basic
financial statements, and have issued our report thereon dated
December 1
6 , 202
1 .
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Air Quality
Management District Fund
's internal control over financial reporting (internal control) as a
basis for designing
audit procedures that are appropriate in the ci
rcumstances 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 Air Quality Management District Fund's
internal control.
Accordingly, we do not express an opin
ion on the effectiveness of
the
Air Quality Management
District Fund's
internal control.
A
deficiency in internal control
exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assi gned 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 basis. A significant deficiency
is a deficiency,
or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important e
nough 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 control 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 may exist that have not been ide ntified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Air Quality Management District
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 applicable provisions of Assembly Bill 2766 (AB2766) Chapter 1705 (Healt h and
Safety Code Sections 44220 through 44247),
noncompliance with which could have a direct
and material effect on the financial statement
s
. However, providing an opinion on compliance
with those provisions was not an objective of our audit, and accordin gly, 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
.
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 performe
d in accordance with
Government Auditing Standards
in considering the entity’s
internal control and compliance. Accordingly, this communication is not suitable for any other pur
pose.
Irvine, California
December 1
6 , 202
1 INDEPENDENT ACCOUNTANT
’
S REPORT
The Honorable Mayor and City Council
City of
Huntington Beach
, California
We have
performed
the procedures enumerated below
on the
City of
Huntington Beach
,
California
(City)
appropriations limit worksheets
for compliance with
the requirements of
Section 1.5 of Article XIIIB of the California Constitution
for
the year ended June 30,
20 2
1 .
The City is responsible for compliance with
Section 1.5 of Article XIIIB of the California
Constitution
.
The
City
has agreed to and acknowledged that th
ese procedures
are appropriate to meet
the intended purpose of evaluating compliance with
the requirements of
Section 1.5 of
Article XIIIB of the California Constitution and the League of California Cities publication entitled
Article XIIIB
Appropriations Limitation Uniform Guidelines
for the ye
ar ended June
30, 20
21. 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
and the associated findings are
as follows:
1. We obtained the worksheets referred to above and compared the limit and annual adjustment factors included in those worksheets to the limit and annual adjustment factors that
were adopted by resolution of the City Council. We also compared the population and inflation options included in the aforementioned worksheets to those that were selected by a recorded vote.
Results: No exceptions were noted as a result of our procedur es.
2. We recalculated the mathematical computations reflected in the City ’s
worksheets.
Results: No exceptions were noted as a result of our procedures.
3. We compared the current year information used to determine the current year limit and agreed
it
to worksheets prepared by the City and to information
provided by the State Department of Finance.
Results: No exceptions were noted as a result of our procedures.
4. We compared the amount of the prior year appropriations limit presented in the worksheet
s to the amount adopted by the City Council for the prior year.
Results: No exceptions were noted as a result of our procedures.
The Honorable Mayor and City Council
City of
Huntington Beach
, California
Page Two
We were engaged by the City to perform this
agreed
-
upon procedures
engagement and
conducted our engagement i
n
accordance with standards established by the American
Institute of Certified Public Accountants. W
e 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
o
n the worksheets referred to above. 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.
No
procedures have been performed
with respect to the determination of the appropriation
limit for the base year, as defined by the League publication entitled
Article XIIIB
Appropriations
Limitation Uniform Guidelines
.
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 Management of the
City of
Huntington Beach
, California
and is not intended to be, and should not be, used by anyone other than the specified part
y
.
Irvine, California
December 1
6 ,
2021