Finance & Management Committee
February 25, 2025
RECOMMENDATION
AGENDA REPORT
Staff Recommends That The City Council Receive The Annual Comprehensive Financial Report (ACFR) And The Auditor’s Required Communication To City Council (Management Letter) For The Year Ended June 30, 2024.
EXECUTIVE SUMMARY
The Finance Department is pleased to present the attached independent annual audit to the City Council, referred to as the Annual Comprehensive Financial Report (ACFR), and the auditor’s required communication to the City Council, also known as the Management Letter.
The audit report incorporates management’s discussion and analysis of the City’s financial position, basic financial statements, notes to basic financial statements, and the independent auditor’s report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards.
Macias, Gini & O’Connell, the City’s external auditor, audited the City’s financial statements for the year ending June 30, 2024 (Attachment A). The auditor’s unmodified opinion letter for the ACFR affirms that the basic financial statements contained therein accurately represent the financial condition of the City of Oakland as of June 30, 2024. The auditor expressed an opinion that the City’s financial statements are fairly stated and in accordance with accounting principles generally accepted in the United States.
The Fiscal Year (FY) 2023-24 ACFR provides relevant financial information to the City Council, residents and businesses of Oakland, creditors, investors, and other interested parties. This report also fulfills the City Council’s responsibilities under Section 809 of the City Charter, which states in part, “The Council shall engage during the first month of each fiscal year an independent certified public accountant who shall examine and report to the Council on the annual financial statement of the City.”
TO: Jestin D. Johnson FROM: Erin Roseman
City Administrator Finance Director
SUBJECT: Annual Comprehensive Financial
Report and Management Letter
DATE: January 30, 2025
City Administrator Approval Date:
Jestin Johnson (Feb 20, 2025 10:35 PST)
Feb 20, 2025
Jestin D, Johnson, City Administrator
Subject: Annual Comprehensive Financial Report and Management Letter Date: January 30, 2025 Page 2
Finance & Management Committee
February 25, 2025
BACKGROUND / LEGISLATIVE HISTORY
The Annual Comprehensive Financial Report
The FY 2023-24 CAFR provides a description of the City’s financial activities for the period of July 1, 2023, through June 30, 2024, and is divided into the following major sections:
• Introductory Section: This section intends to familiarize the reader with the organizational structure of the City, the scope of City services, and the City’s general government operations. This section also highlights the Government Finance Officers Association’s (GFOA) Certificate of Achievement for Excellence in Financial Reporting award for the previous fiscal year;
• Financial Section: This section contains the City’s audited financial statements, notes to the basic financial statements, the Independent Auditor’s Report, and Management’s Discussion and Analysis (MD&A); and
• Statistical Section: This section provides ten years of summary financial data, as well as demographic, economic, and statistical information related to the City and its operations.
The auditor’s opinion contained in the Financial Section of the ACFR represents their unmodified opinion that the City’s financials are presented fairly and in conformity with Generally Accepted Accounting Principles (GAAP).
The Management Letter or Auditor’s Required Communication to City Council
The Management Letter (Attachment B) is a required communication and recommendation by Statement on Auditing Standards (SAS) No. 114. The letter outlines the auditor’s responsibility, planned scope, and timing of the audit, and provides advice on accounting policies, evaluates accounting estimates, proposes audit adjustments, and notes significant audit findings, the status of prior years’ recommendations, corrected and uncorrected misstatements, disagreements with management, management representations, and any major difficulties encountered in performing the audit.
The Management Letter is intended solely for the information and use of the City Council, the Finance and Management Committee, Federal grantor agencies, and the management of the City.
ANALYSIS AND POLICY ALTERNATIVES
The FY 2023-24 ACFR provides a comprehensive review of the City’s financial operations. The ACFR is submitted to the City Council for review and to provide relevant financial information to the residents of Oakland, creditors, investors, and other interested parties. This document includes an opinion from the City’s external auditor that the City’s financial statements for FY 2023-24 are fairly stated in conformity with accounting principles generally accepted in the United States. This is the most favorable conclusion and is commonly known as an Jestin D, Johnson, City Administrator
Subject: Annual Comprehensive Financial Report and Management Letter Date: January 30, 2025 Page 3
Finance & Management Committee
February 25, 2025
"unmodified" or "clean" opinion. The independent auditor’s report is included in the Financial Section of the ACFR.
Notably, the auditor’s opinion for FY 2023-24 highlights the City’s substantial projected General Fund deficit for FY 2024-25. A failure to address this deficit would impair the City’s ability to maintain basic governmental operations and could result in future audit findings regarding the City’s ability to continue as a going concern.
Acceptance of this report supports the citywide priority of responsive, trustworthy government through the disclosure of timely and detailed information on the City’s financial condition.
Financial Highlights
For the fiscal year ending June 30, 2024, total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $982.8 million. This result compares to a net position of $859.9 million as of June 30, 2023, and reflects a $122.9 million improvement on a government-wide basis, as detailed in Table 1.
Of the $122.9 million improvement in net position, $49.8 million was derived from increases in general revenues, including $37.9 million in interest and investment income, $36.1 million in property tax, $8.1 million in business license tax, and $7.8 million in voter-approved special tax, offset by a decline of $20.4 million in real estate transfer tax resulting from decreased sales activity. In addition, a gain in net position of $11.6 million is due to the combined impact of changes to pension and OPEB liabilities. OPEB-related changes improved net position by $35.5 million, while pension-related changes reduced net position by $23.9 million.
The City’s net position of $982.8 million incorporates a $1.2 billion deficit in unrestricted net position primarily resulting from the historical underfunding of pension and OPEB liabilities. The net pension liability accounts for $1.9 billion of this deficit, and the net OPEB liability accounts for $0.5 billion. The City’s unrestricted net deficit remains substantial but declined by $70.0 million in the fiscal year ended June 30, 2024.
Capital assets such as buildings, land, and equipment, less any related outstanding debt, account for $1.3 billion of the City’s net position. These capital assets are used to provide services to residents and are not available for future spending.
Resources subject to restrictions on their use, such as bond proceeds or grant funds, contribute an additional $838.7 million to the net position and are available to meet the City’s ongoing obligations for specific programs. Of this amount, $372.2 million is restricted for Housing and Community Development programs, $339.4 million pertains to Low and Moderate Income Housing Redevelopment, and $51.1 million is restricted for debt service.
The total fund balance for the City's governmental funds increased by 2.5 percent, or $37.6 million, ending the year at $1.5 billion. This increase is primarily due to the receipt of $158.9 million in bond proceeds during the year.
Jestin D, Johnson, City Administrator
Subject: Annual Comprehensive Financial Report and Management Letter Date: January 30, 2025 Page 4
Finance & Management Committee
February 25, 2025
The total fund balance in the consolidated General Fund decreased by 4.5 percent, or $30.3 million, falling to $641.7 million. This decline reflects the ongoing structural imbalance between General Fund revenues and expenditures.
As of June 30, 2024, the General Purpose Fund Emergency Reserve, a subfund of the General Fund, had a balance of $70.2 million. In addition, the General Purpose Fund has an unassigned fund balance of negative $47.8 million. In combination, these reserves totaled $22.3 million, which is $63 million below the prior year’s General Fund reserves of $85.3 million.
Table 1: Consolidated Statements of Net Position June 30, 2024 and 2023 (in thousands):
Governmental Activities Business-Type
Activities
Total
2024 2023 2024 2023 2024 2023
Assets
Current and other assets $2,764,317 $2,580,429 $118,968 $108,102 $2,883,285 $2,688,531 Capital assets 1,528,585 1,460,862 251,139 252,179 1,779,724 1,713,041 Total Assets 4,292,902 4,041,291 370,107 360,281 4,663,009 4,401,572
Deferred outflows of resources
Loss on refunding of debt 8,553 9,778 — — 8,533 9,778 Pensions 547,002 554,939 12,232 12,739 559,234 567,678 OPEB 174,814 161,727 3,208 3,246 178,022 164,973
Total Outflows 730,530 726,444 15,440 15,985 745,790 742,429
Liabilities
Long-term liabilities 1,179,526 1,096,614 17,510 20,573 1,197,036 1,117,187 Other liabilities 500,824 440,093 3,409 3,110 504,233 443,203 Net pension liability 1,834,077 1,807,672 48,568 47,740 1,882,645 1,855,412 Net OPEB liability 539,538 484,098 9,438 8,838 548,976 492,936 Total Liabilities 4,053,965 3,828,477 78,925 80,261
4,132,890 3,908,738
Deferred inflows of resources
Gains on refunding of debt 2,062 2,303 197 237 2,259 2,540 Leases 40,104 31,828 — — 40,104 31,828
Pensions 19,033 30,421 522 889 19,555 31,310
OPEB 225,883 303,166 5,264 6,513 231,147 309,679
Total deferred inflows 287,082 367,718 5,983 7,639 293,065 375,357
Net Position
Net investment in cap. assets 1,074,554 1,049,243 233,432 231,369 1,307,986 1,280,612 Restricted 838,677 813,094 — — 838,677 813,094
Unrestricted (deficit) (1,231,028) (1,290,793) 67,203 56,997 (1,163,825) (1,233,796) Total net position $682,203 $571,544 $300,635 $288,366 $982,838 $859,910
PUBLIC OUTREACH / INTEREST
This item did not require any additional public outreach other than the required posting on the City’s website.
Jestin D, Johnson, City Administrator
Subject: Annual Comprehensive Financial Report and Management Letter Date: January 30, 2025 Page 5
Finance & Management Committee
February 25, 2025
Erin Roseman (Feb 4, 2025 15:39 PST)
COORDINATION
This report was prepared by the Finance Department and incorporates financial data for all City departments and the Port of Oakland.
SUSTAINABLE OPPORTUNITIES
Economic: There are no direct economic opportunities associated with this informational report.
Environmental: There are no direct environmental opportunities associated with this informational report.
Race & Equity: There are no direct race or equity opportunities associated with this informational report.
ACTION REQUESTED OF THE CITY COUNCIL
Staff Recommends That The City Council Receive The Annual Comprehensive Financial Report (ACFR) And The Auditor’s Required Communication To City Council (Management Letter) For The Year Ended June 30, 2024.
For questions regarding this report, please contact Stephen Walsh, Controller, at (510) 238- 4906.
Respectfully submitted,
ERIN ROSEMAN
Finance Director
Finance Department
Prepared by:
Stephen Walsh, Controller
Controller’s Bureau
Attachments (2):
A: Annual Comprehensive Financial Report For the Year Ended June 30, 2024 B: Auditor’s Required Communication to City Council (Management Letter)