CITY OF MENIFEE
SUBJECT: Fiscal Year 2023/24 Annual Financial Audit Update MEETING DATE: November 12, 2024
TO: Finance Committee
PREPARED BY: Margarita Cornejo, Deputy Finance Director REVIEWED BY: Travis Hickey, Chief Financial Officer
APPROVED BY: Armando G. Villa, City Manager
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RECOMMENDED ACTION
1. Receive and file the City of Menifee Annual Financial Audit Process Overview Presentation for Fiscal Year 2023/24; and
2. Provide feedback on future year(s) financial audit updates.
DISCUSSION
The City of Menifee (“City”) organizes its annual operations into individual fiscal years, defined as the 12- month period from July 1 st to June 30 th of the following year. In preparation for each upcoming new year, and as part of its financial planning, the City strategically organizes its upcoming revenue and expenditure plan through the annual budget process and beginning Fiscal Year (“FY”) 2023-24 as a biennial or 2-year budget process. Once the fiscal year begins, the City’s financial management continues under the governance of all applicable local, state, and federal regulations. Further, financial transactions are recorded in conformance with Generally Accepted Accounting Principles (“GAAP”) as set forth by the Governmental Accounting Standards Board (“GASB”).
Following the close of each fiscal year, the City’s external auditors, currently Rogers, Anderson, Malody & Scott, LLP (“RAMS”), conduct an audit of the City’s financial records and assist in the compilation of the Annual Comprehensive Financial Report (“ACFR”). The purpose and value of external financial reporting is standardized financial reporting and accountability. The goal of a financial statement audit is to provide users and the public in general with reasonable assurance from an independent source that the information presented in the agency’s statements is reliable. Additionally, any entity spending $750,000 or more in any fiscal year of direct or pass- through federal funds, is subject to the Single Audit. A Single Audit includes an audit of the organization’s financial statements and compliance with Federal award requirements for those programs identified as "major programs". During completion of the main financial audit and/or
City of Menifee Staff Report
Fiscal Year 2023/24 Annual Financial Audit Update
November 12, 2024
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Single Audit, the external auditors, may identify any significant deficiencies (a deficiency or combination of deficiencies in internal controls), material weaknesses (failings in internal controls) and or findings (significant concern about the agency control over public resources or other issues). The engagement culminates with the auditors issuing an opinion on the overall financial statements. The highest level of opinion an auditor can issue is known as an “unmodified” opinion, indicating their conclusion that the financial statements are presented fairly in all material respects. Additionally, from time-to-time new GASB statements are issued to reflect new financial reporting standards. The City is responsible for adhering to any existing and new applicable GASB statements as part of its overall financial reporting and management.
Table 1 provides a summary of the key components, purpose, and timeline of the annual financial audit process.
Table 1: Annual Financial Audit Process Overview
Annual Audit Step Description Purpose Tentative Timeline Interim Audit Process
Initiates financial audit
process, with onsite/hybrid
review of FY2023/24 financial
transactions and processes.
Established tentative audit
completion timeline for the fall.
May/June of ending
fiscal year.
Year End/Financial Audit
Following internal close-out
processes, final
comprehensive onsite/hybrid
review including trial
balance(s).
October
Single Audit
Reviews how well the City
managed federal grants and
ensures applicable rules for
dollars associated with the
grant or award were followed.
October/November
Financial Statements/ACFR &
Single Audit Report
Preparation and review of
Financial Statements. November/December
Council Receive & File
Receive presentation by
Finance Department and
external audit team on
Financial Statements of the
fiscal year ended, and
financial position based on
completed fiscal year.
January
FY2023/24 Audit Summary:
For FY2023/24, audit efforts began in the spring of 2024. The external audit team from RAMS met with Finance Department Management Staff during the Interim Audit process and provided feedback on the various processes reviewed, as well as set a tentative audit completion timeline for the fall.
City of Menifee Staff Report
Fiscal Year 2023/24 Annual Financial Audit Update
November 12, 2024
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Unique to the FY2023/24 audit year, is the City’s new Enterprise Resource Planning (“ERP”) project. While much of the year and transactions were processed through the City’s previous solution, Tyler Eden, final year-end processes and close out will occur in the new ERP (“Munis/Menifee Metro”).
During FY2023/24, including the American Rescue Plan (“ARP”) expenditures, the City did expend more than $750,000 in federal funds, therefore the City will be subject to the Single Audit.
The City’s non-ARP federal grant expenditures exceeded $750,000 for the year.
During the months of November and December, staff will work on the development of the ACFR, including the Financial Statements and accompanying Management Discussion and Analysis (“MD&A”), Single Audit report, and staff report for the City Council to receive and file in January 2025. As an agency, the City continues to prioritize strong financial management and reporting practices, understanding the importance of accountability and transparency to the public. Staff will continue to work on strengthening and streamlining processes, striving to obtain an unmodified opinion on its annual financial audit.
Future Year(s) Financial Audit Updates:
As part of strengthening the financial reporting process, staff has asked the auditors to attend the November 12, 2025, Finance Committee meeting to engage with the Finance Committee members about the audit process. The goal is to open lines of communication directly between the auditors and governing board in a less formal and more interactive way prior to the typical receive and file report presented at the conclusion of the audit.
As previously mentioned, the FY2023/24 financial audit process is well underway, with the interim audit completed earlier in the spring. Staff is requesting feedback from the Finance Committee for future year(s) updates of when the Committee would like to be updated on the financial audit process. Options include in the early spring in preparation for the first step of the audit (Interim) to begin, in the fall after interim has been completed, and final audit reviews are underway, or prior to presentation of the completed financial audit to City Council.
ATTACHMENTS
1. FY2023/24 Audit Presentation