DATE:
December 17, 2024
CATEGORY:
Consent
DEPT.:
Finance and Administrative Services
TITLE: Accept and File Fiscal Year 2023-24
Annual Comprehensive Financial Report
and Related Auditor Reports
RECOMMENDATION
Accept and file the following reports pertaining to Fiscal Year 2023 -24: (1) City of Mountain View’s Annual Comprehensive Financial Report with Independent Auditor ’s Report (Attachment 2 to the Council report) ; (2) Article XIII -B Appropriations Limit Agreed -Upon Procedures Report (Attachment 3 to the Council report) ; and (3) Report to the City Council — Required Communications (Attachment 4 to the Council report).
BACKGROUND
Section 1106 of the City Charter and Council Policy B -6 require an independent certified public accountant, also called an independent auditor, to audit the City’s financial records no less than on an annual basis. Badawi & Associates (Badawi) serves as the City’s independent auditor. On December 6, 2024, Ahmed Badawi of Badawi presented the results of the annual audit of the City’s financial records, along with their observations, conclusions, and findings, to the Council Finance Committee (CFC). A copy of the CFC memo is included as Attachment 5.
The presentation included an explanation of the various components of the Annual Comprehensive Financial Report (ACFR) , highlight s from the Independent Auditor’s Report, Management’s Discussion and Analysis, Notes to the Financial Statements, and other information that is required by auditing standards to be communicated. (The ACFR is included as Attachment
2.) It was noted that the auditor’s opinion was of the highest level possible and that there were no conflicts or other findings from this year’s audit. The CFC discussed the audit results, which included various questions on the financial statement revenues and expenditures. The CFC then recommended the City Council accept and file the ACFR, as presented, at the December 17, 2024 Council meeting.
Copies of these documents are available for public review at the City’s Library and Finance and Administrative Services lobby on the second floor of City Hall. They are also available on the Council Agenda page of the City’s website at: https://mountainview.legistar.com/
Accept and File Fiscal Year 2023-24 Annual Comprehensive Financial Report and Related Auditor Reports
December 17, 2024
DepartmentDetail.aspx?ID=22578&GUID=1ABE7286-1989-4A9C-A9F6-195A4BFDEDEE&Mode =MainBody.
ANALYSIS
The City’s ACFR is utilized by many users, including the public, the federal government, the State of California, and credit rating agencies, among others, to monitor the City’s financial condition and to use as a tool to rate the City’s bond issues. Action taken tonight will formally accept and file the ACFR and related auditor reports in order to comply with grant and other statutory requirements as well as for the benefit of investors and the general public.
A detailed analysis of the General Operating Fund (GOF) audited results compared to the Budget is included as Attachment 1 . F or Fiscal Year 2023 -24, the City had a year-end GOF balance of $7.1 million. This was $4.8 million higher than the $2.3 million Estimated Operating Balance that was projected in June 2024 for the Fiscal Year 2024 -25 Recommended Budget and only $ 0.2 million higher than the $6.9 million Estimated Operating Balance that was projected in October 2024 when the Fiscal Year 2024 -25 Adopted Budget was published. The $7.1 million actual Operating Balance is $8.1 million more than the Adjusted Budget, which includes Council - approved adjustments made subsequent to the Adopted Budget. Most of the positive variance stemmed from operating revenues closely aligning with the Adjusted Budget and o perating expenditures being $9.6 million lower than the Adjusted Budget.
This analysis also shows the GOF balance allocat ions as adopted by Council in the Fiscal Year 2023-24 Adopted Budget. In recent years, t he allocations were used to fund City needs, including limited-period expenditures , infrastructure needs, the Compensated Absences Reserve, long-term liabilities, and the General Fund Reserve.
Report on Compliance with Article XIII-B—Appropriations Limit
Article XIII -B of the State Constitution, also known as the Gann Limit , established an annual appropriations limit for governmental entities and specified certain indicators to be used in calculation of the annual appropriations limit increase. The appropriations limit calculation f or Fiscal Year 2023- 24 is $ 356,727,282. The appropriations subject to limitation total is $133,942,950; accordingly, the City is significantly under the Constitutional limit on appropriations funded from taxes and, therefore, in compliance with the Gann Limit. (The Gann Limit report is included as Attachment 3.)
Report to the City Council—Required Communications
The last part of th e report is the required communications from Badawi (Attachment 4) . The purpose of this report is to ensure transparent communication between the audit firm and the Accept and File Fiscal Year 2023-24 Annual Comprehensive Financial Report and Related Auditor Reports
December 17, 2024
Council, including significant matters identified during the audit. As part of the City’s annual financial audit, Badawi reviews and comments on the City’s internal controls over financial reporting for the purpose of the audit of the financial statements and is required to communicate certain information to the governing body (City Council). This require d communication is included as Attachment 4 . Comments are intended to advise management of the existence of any material weaknesses in the City’s internal controls. A material weakness is a sign ificant deficiency, or combination of deficiencies in internal controls, such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected and corrected on a timely basis. No material weaknesses in the City’s internal controls were noted by Badawi.
In addition, the report provides assistance to City staff for improving its records and operations and may communicate other advisory information, such as future accounting and reporting requirements, which could have an effect on the City’s financial reporting.
Statement on Auditing Standards 114 (SAS 114), The Auditor’s Communication with those Charged with Governance, details the significant matters encountered during the audit that should be communicated to Council. These include an outline of the scope of audit procedures, significant audit risks that have been identified, significant accounting estimates made by the City, any disagreements with management, audit adjustments made, unusual transactions, and any difficulties encountered during the audit.
While two risks were identified by Badawi, nearly all financial audits have some inherent risks.
Badawi also reported there were no disagreements with management, no audit adjustments that would have a significant effect on the financial statements , no unusual transactions, and no difficulties encountered during the audit.
FISCAL IMPACT
Accepting the ACFR and related reports from the independent auditor does not have a fiscal impact to the City.
LEVINE ACT
California Government Code Section 84308 (also known as the Levine Act) prohibits city officials from participating in any proceeding involving a “license, permit, or other entitlement for use” if the official has received a campaign contribution exceeding $250 from a party, participant, or agent of a party or participant in the proceeding within the last 12 months. A city official is similarly prohibited from accepting, soliciting, or directing a campaign contribution exceeding $250 from a party, particip ant, or agent of a party or participant to any proceeding involving a Accept and File Fiscal Year 2023-24 Annual Comprehensive Financial Report and Related Auditor Reports
December 17, 2024
license, permit, or other entitlement for use for 12 months after a final decision is rendered in said proceeding.
Please refer to the “X” in the checklist below for information about whether the recommended action for this agenda item is subject to or exempt from the Levine Act.
SUBJECT TO THE LEVINE ACT
___ Land development entitlements
___ Other permit, license, or entitlement for use
___ Contract or franchise
EXEMPT FROM THE LEVINE ACT
___ Competitively bid contract
___ Labor or personal employment contract
_X_ General policy and legislative actions
For more information about the Levine Act, please see the Fair Political Practices Commission website: www.fppc.ca.gov/learn/pay-to-play-limits-and-prohibitions.html.
ALTERNATIVES
1. Do not accept the ACFR and auditor’s reports.
2. Provide other direction.
Accept and File Fiscal Year 2023-24 Annual Comprehensive Financial Report and Related Auditor Reports
December 17, 2024
PUBLIC NOTICING—Agenda posting.
Prepared by:
Helen He
Accounting Manager
Grace Zheng
Assistant Finance and Administrative
Services Director
Approved by:
Derek Rampone
Finance and Administrative
Services Director
Audrey Seymour Ramberg
Assistant City Manager
HH-GZ/4/CAM
525-12-17-24CR
203852
Attachments: 1. Analysis of Fiscal Year 202 3-24 Audited Financial Results for the General Operating Fund
2. Annual Comprehensive Financial Report and Independent Auditor’s Reports
3. Article XIII-B Appropriations Limit
4. Report to the City Council—Required Communications
5. Council Finance Committee Staff Report Dated December 6, 2024