CITY OF MANTECA
REQUIRED COMMUNICATIONS
FOR THE YEAR ENDED
JUNE 30, 2021
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ATTACHMENT 3
CITY OF MANTECA
REQUIRED COMMUNICATIONS
For the Year Ended June 30, 2021
Table of Contents
Page
Required Communications .................................................................................................................. 1 Significant Audit Matters ........................................................................................................... 1 Accounting Policies ............................................................................................................... 1 Unusual Transactions, Controversial or Emerging Areas .................................................... 1 Accounting Estimates ............................................................................................................. 1 Disclosures ............................................................................................................................. 2 Difficulties Encountered in Performing the Audit ................................................................. 2 Corrected and Uncorrected Misstatements ........................................................................... 3 Disagreements with Management .......................................................................................... 3 Management Representations ................................................................................................ 3 Management Consultations with Other Independent Accountants ........................................ 3 Other Audit Findings or Issues ............................................................................................... 3 Other Information Accompanying the Financial Statements ..................................................... 4 ATTACHMENT 3
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REQUIRED COMMUNICATIONS
To the City Council of
the City of Manteca, California
We have audited the basic financial statements of the City of Manteca, California, as of and for the year ended June 30, 2021. Professional standards require that we communicate to you the following information related to our audit under generally accepted auditing standards, Government Auditing Standards and the Uniform Guidance.
Significant Audit Matters
Accounting Policies
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. No new accounting policies were adopted, and the application of existing policies was not changed during the year.
The following Governmental Accounting Standards Board (GASB) pronouncement became effective, but did not have a material effect on the financial statements:
GASB 84 - Fiduciary Activities
GASB 90 - Equity Interests (an amendment of GASB Statements No. 14 and No. 61) Unusual Transactions, Controversial or Emerging Areas
We noted no transactions entered into by the City 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 period.
Accounting Estimates
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’s financial statements were:
Estimated Fair Value of Investments: As of June 30, 2021, the City held approximately $308.8 million of cash and investments as measured by fair value as disclosed in Note 3 to the financial statements. Fair value is essentially market pricing in effect as of June 30, 2021. These fair values are not required to be adjusted for changes in general market conditions occurring subsequent to June 30, 2021.
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Estimated Net Pension Liabilities and Pension-Related Deferred Outflows and Inflows of Resources: Management’s estimate of the net pension liabilities and related deferred outflows/inflows of resources are disclosed in Note 10 to the financial statements and are based on accounting valuations determined by the California Public Employees Retirement System as well as actuarial studies determined by a consultant, which are based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole.
Estimated Total OPEB Liability and OPEB Related Deferred Outflows and Inflows of Resources:
Management’s estimate of the total OPEB liability and related deferred outflows/outflows of resources are disclosed in Note 11 to the financial statements and is based on actuarial studies determined by a consultant, which are based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole.
Estimate of Depreciation: Management’s estimate of the depreciation is based on useful lives determined by management. These lives have been determined by management based on the expected useful life of assets as disclosed in Note 7 to the financial statements. We evaluated the key factors and assumptions used to develop the depreciation estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole.
Estimate of Compensated Absences: Accrued compensated absences which are comprised of accrued vacation, holiday, and certain other compensating time is estimated using accumulated unpaid leave hours and hourly pay rates in effect at the end of the fiscal year as disclosed in Note 1G to the financial statements. We evaluated the key factors and assumptions used to develop the accrued compensated absences and determined that it is reasonable in relation to the basic financial statements taken as a whole.
Estimated Claims Liabilities: Management’s estimate of the claims liabilities payable is disclosed in Note 13 to the financial statements and is based on the prior year claims experience of the City. We evaluated the key factors and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole.
Disclosures
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. However, the audit was delayed significantly due to the turnover of staff in the Finance Department and the need for interim/acting personnel and new Finance staff, along with multiple consultants, to complete analyses and schedules needed to complete the audit. In addition, Finance staff took additional time to work to get information into the newly purchased accounting workflow automation software that was used to facilitate the general ledger reconciliation processes. 2 ATTACHMENT 3
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 all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit’s financial statements taken as a whole, except those to record the fiscal year 2021 closing entries for interfund activities, accounts and grants receivable, accounts payable, unavailable revenue, capital expenditures and special assessment revenue, as discussed in Memorandum on Internal Control comments 2021-001.
Professional standards require us to accumulate all known and likely uncorrected misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. We have no such misstatements to report to the City Council.
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 a management representation letter dated August 2, 2023.
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’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 management each year prior to retention as the City’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.
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Other Information Accompanying the Financial Statements We applied certain limited procedures to the required supplementary information that accompanies and supplements the basic financial 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 required supplementary information and do not express an opinion or provide any assurance on the required supplementary information.
We were engaged to report on the supplementary information which accompany the financial statements, but are not required supplementary information. 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 supplementary 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 the Introductory and Statistical Sections which accompany the financial statements, but are not required supplementary information. 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.
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This information is intended solely for the use of City Council and management and is not intended to be, and should not be, used by anyone other than these specified parties.
Pleasant Hill, California
August 2, 2023
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