CITY OF MOUNTAIN VIEW, CALIFORNIA
Report to the City Council
For the Fiscal Year Ended June 30, 2022
Attachment 4
CITY OF MOUNTAIN VIEW, CALIFORNIA
Report to the City Council
For the Fiscal Year Ended June 30, 2022
Table of Contents
Page(s)
Transmittal Letter ........................................................................................................................................... i
Required Communications ............................................................................................................................ 1
www.mgocpa.com
Macias Gini & O’Connell LLP
2121 N. California Boulevard, Suite 750
Walnut Creek, CA 94596
i
Honorable Mayor and Members of the City Council
City of Mountain View, California
We have audited the financial statements of the governmental ac tivities, the business-type activities, each major fund, and the aggregate remaining fund information of Cit y of Mountain View, California (City), as of and for the year ended June 30, 2022, and the related not es to the financial statements, which collectively comprise the City’s basic financial statements, an d have issued our report thereon dated November 18, 2022. Professional standards require that we advise you the matters related to our audit discussed on pages 1 through 5.
In planning and performing our audit of the basic financial sta tements of the City as of and for the year ended June 30, 2022, in accordance with auditing standards gene rally accepted in the United States of America and the standards applicable to financial audits contai ned in Government Auditing Standards , issued by the Comptroller General of the United States, we cons idered the City’s internal control over 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 entity’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 allow management or employees, in the normal course of performing the ir 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 reas onable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A reasonable possibility exists when the likelihood of an event occurring is either reasonably possible or probable as defined as follows:
Reasonably possible. The chance of the future event or events occurring is more than remote but less than likely.
Probable. The future event or events are likely to occur.
Our consideration of internal control was for the limited purpo se described in the second paragraph and was not designed to identify all deficiencies in internal contr ol that might be material weaknesses. Given these limitations during our audit, we did not identify any def iciencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
The purpose of this communication, which is an integral part of our audit, is to describe, for management and those charged with governance, the scope of our testing of internal control and the results of that testing. Accordingly, this communication is not intended to be and should not be used for any other purpose. This report is a matter of public record and this does not limit the distribution of this report.
Walnut Creek, California
November 18, 2022
CITY OF MOUNTAIN VIEW, CALIFORNIA
Report to the City Council
For the Fiscal Year Ended June 30, 2022
1 REQUIRED COMMUNICATIONS
Our Responsibility in Relation to the Financial Statement Audit
As communicated in our engagement letter dated June 30, 2022, o ur responsibility, as described by professional standards, is to form and express opinions about w hether the financial statements that have been prepared by management with your oversight are presented f airly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities.
Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the f inancial statements are free of material misstatement. An audit of financial statements includes conside ration of internal control over financial reporting as a basis for designing audit procedures that are ap propriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of th e entity’s internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of the City solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.
We are also responsible for communicating significant matters r elated to the audit that are, in our professional judgment, relevant to your responsibilities in ove rseeing the financial reporting process.
However, we are not required to design procedures for the purpo se of identifying other matters to communicate to you.
Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and ti ming we previously communicated to you.
Compliance with All Ethics Requirements Regarding Independence
The engagement team, others in our firm, as appropriate, our fi rm, and our network firms have complied with all relevant ethical requirements regarding independence.
Qualitative Aspects of the City’s Accounting Practices
Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the City is included in Note 1 to the financial statements. As described in Note 1 to the City’s basic financial statements, t he City implemented Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. Implementation of this statement resulted in the reduction of $2.2 million for the fund balance of the General Fund and net position of the governmental activities as of June 30, 2021. The $2.2 million restated amount is comprised of the addition of lease receivables of $805.4 million, addition of deferred inflow of resources of $810.5 million, and reduction of unearned revenue of $2.9 million.
CITY OF MOUNTAIN VIEW, CALIFORNIA
Report to the City Council
For the Fiscal Year Ended June 30, 2022
2 The City also implemented GASB Statement No. 89, Accounting for Interest Co st Incurred before the End of a Construction Period ; Statement No. 92, Omnibus 2020 , Statement No. 93, Replacement of Interbank Offered Rates , Statement No. 97; Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans – an Amendment of GASB Statements No. 14 and No. 84, and a Supersession of GASB Statement No 32 ; and certain requirements of GASB Statement No. 99, Omnibus 2022. The implementation of these statements did not have a significant impact on the City’s financial state ments for the fiscal year ended June 30, 2022.
No matters have come to our attention that would require us, un der professional standards, to inform you about (1) the methods used to account for significant unusual t ransactions and (2) the effect of significant accounting policies in controversial or emerging areas for whic h there is a lack of authoritative guidance or consensus.
Significant Accounting Estimates
Accounting estimates are an integral part of the financial stat ements prepared by management and are based on management’s current judgments. Those judgments are no rmally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significa nce to the financial statements and because of the possibility that future events affecting them may differ ma rkedly from management’s current judgments.
The most sensitive accounting estimates affecting the financial statements are:
Fair value of investments. The City’s investments are generally carried at fair value, whi ch is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurem ent date. All of the City’s investments are measured using level 2 inputs, except for inves tments in the California Local Agency Investment Fund and money market mutual funds which are not subject to fair value hierarchy.
Depreciation estimates for capital assets, in cluding depreciation methods and useful lives assigned to depreciable assets . The estimated useful lives of capital assets were determined based on the nature of the capital assets and management’s esti mate of the economic life of the assets.
Net pension and Other Postemployment Benefits (OPEB) liabilities, contributions, expenses, and other related balances. These balances for pension and OPEB are based on actuarial val uations, which incorporate actuarial methods and assumptions adopted by the City, performed by the California Public Employees’ Retirement System’s and the City’s independent actuaries, respectively.
Accrued landfill containment costs. The City has estimated the landfill containment and postclosure costs of the landfill sites based on what it would cost to perform all currently mandated containment and postclosure care. Actual costs may be different due to inflation, changes in State or Federal regulations; or changes in technology. Claims liabilities. The City is exposed to a variety of risks of loss due to gener al liability, workers’ compensation and other claims, and records an estimate of these losses based on actuarial studies performed by third-party actuaries. These stu dies are prepared based on the City’s prior claims history, which is used as a basis for extra polating losses for known and incurred but not reported claims. Actual loss experience may vary from these estimates.
CITY OF MOUNTAIN VIEW, CALIFORNIA
Report to the City Council
For the Fiscal Year Ended June 30, 2022
3 Discount rate used for the calculation of lease liability and l ease receivable. The discount rate used for the calculation of the lease liability and lease recei vable are based on the City’s estimated incremental borrowing rate using AAA General Obligations rates.
We evaluated the key factors and assumptions used to develop th e accounting estimates described above and determined that they are reasonable in relation to the basi c financial statements taken as a whole and in relation to the applicable opinion units.
Financial Statement Disclosures
Certain financial statement disclosures involve significant jud gment and are particularly sensitive because of their significance to financial statement users. The most se nsitive disclosures affecting the City’s financial statements related to Pension Plans in Note 8, Other Postemployment Benefits in Note 9, Leases in Note 11, and Commitments and Contingencies in Note 13.
Significant Difficulties Encountered during the Audit
We encountered no significant difficulties in dealing with mana gement relating to the performance of the audit.
Corrected and Uncorrected Misstatements
For purposes of this communication, professional standards also require us to accumulate all known and likely misstatements identified during the audit, other than th ose that we believe are trivial, and communicate them to the appropriate level of management. Furthe r, professional standards require us to also communicate the effect of unc orrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the finan cial statements as a whole and each applicable opinion unit. Management has corrected all identified mistatements.
In addition, professional standards require us to communicate t o you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. None of the misstatements identified by us as a result of our audit procedu res and corrected by management were material, either individually or in the aggregate, to the finan cial statements taken as a whole or applicable opinion units.
Disagreements with Management
For purposes of this letter, professional standards define a di sagreement with management as a matter, whether or not resolved to our satisfaction, concerning a finan cial accounting, reporting, or auditing matter, which could be significant to the City’s financial stat ements or the auditor’s report. No such disagreements arose during the course of the audit.
Representations Requested from Management
We have requested certain written representations from manageme nt, which are included in a letter from management dated November 18, 2022.
CITY OF MOUNTAIN VIEW, CALIFORNIA
Report to the City Council
For the Fiscal Year Ended June 30, 2022
4 Management’s Consultations with Other Accountants
In some cases, management may decide to consult with other acco untants about auditing and accounting matters. Management informed us that, and to our knowledge, the re were no consultations with other accountants regarding auditing and accounting matters.
Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the C ity, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, significant events or transactions that occurred during the year, operating and regul atory conditions affecting the entity, and operational plans and strategies that may affect the risks of m aterial misstatement. None of the matters discussed resulted in a condition to our retention as the City’s auditors.
Other Information Included in Annual Reports
Pursuant to professional standards, our responsibility as audit ors for other information, whether financial or nonfinancial, included in the City’s annual reports, does no t extend beyond the information identified in the audit report, and we are not required to perform any pro cedures to corroborate such other information. However, in accordance with such standards:
Required Supplementary Information
We have applied certain limited procedures to the management’s discussion and analysis, the schedules of changes in net pension liability and related ratios, the schedu le of employer pension contributions, the schedule of changes in net OPEB liability and related ratios, a nd the schedule of employer OPEB contributions, which are required supplementary information (RS I) that supplements the basic financial statements. Our procedures consisted of inquiries of management about the methods of preparing the information and comparing the in formation 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 a ny assurance on the information because the limited procedures do not provide us with sufficient eviden ce to express an opinion or provide any assurance.
Supplementary Information
We were engaged to report on th e individual and combining fund financial statements and schedules, which accompany the financial statements but are not RSI. Such information is the responsibility of management and was derived from and relates directly to the und erlying accounting and other records used to prepare the basic financ ial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statemen ts and certain additional procedures, including comparing and reconciling such information directly t o the underlying accounting and other records used to prepare the basi c financial statements or to th e basic financial statements themselves, and other additional procedures in accordance with auditing standar ds generally accepted in the United States of America.
CITY OF MOUNTAIN VIEW, CALIFORNIA
Report to the City Council
For the Fiscal Year Ended June 30, 2022
5 Other Information
We were not engaged to report on the introductory section and s tatistical section, which accompany the financial statements but are not RSI or supplementary informati on. Our opinions on the basic financial statements do not cover the other information, and we do not ex press an opinion or any form of assurance thereon. In connection with our audit of the basic financial s tatements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated.
Our responsibility also includes communicating to you any infor mation which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the inf ormation, or manner of its presentation, appearing in the financial statements.
Modification of the Auditor’s Report
Our report includes an emphasis of matter paragraph to referenc e to Note 1 to the basic financial statements for the City’s implementation of GASB Statement No. 87, Leases. Our opinion is not modified with respect to this matter.