CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
JUNE 30, 2021 FINANCIAL STATEMENT
CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
FINANCIAL STATEMENTS
WITH REPORT ON AUDIT
BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
JUNE 30, 2021
CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
FINANCIAL STATEMENTS
WITH REPORT ON AUDIT
BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
YEAR ENDED JUNE 30, 2021
TABLE OF CONTENTS
Page
Number
FINANCIAL SECTION
INDEPENDENT AUDITORS’ REPORT .................................................................................................. 1
BASIC FINANCIAL STATEMENTS
GOVERNMENT - WIDE FINANCIAL STATEMENTS
Statement of Net Position .................................................................................................................... 4
Statement of Activities.......................................................................................................................... 5
FUND FINANCIAL STATEMENTS
Balance Sheet – Governmental Fund .................................................................................................. 6
Reconciliation of the Governmental Fund Balance
Sheet to the Statement of Net Position ...................................................................................... 7
Statement Of Revenues, Expenditures and Changes In
Fund Balance – Governmental Fund: ........................................................................................ 8
Reconciliation Of the Governmental Fund Statement Of
Revenues, Expenditures and Changes in Fund Balance
To The Statement of Activities ................................................................................................... 9
Notes to Financial Statements .............................................................................................................. 10
REQUIRED SUPPLEMENTARY INFORMATION
Budgetary Comparison Schedule ........................................................................................................ 16
Note to Required Supplementary Information ................................................................................. 17
OTHER REPORT
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 ................................................................................ 18
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council
City of Orange, California
Report on the Financial Statements
Opinions
We have audited the accompanying financial statements of the go vernmental activities and the Air Pollution Reduction Fund (“the Fund”), a special revenue fu nd of the City of Orange, California, (the “City”) as of and for the year ended June 30, 2021, and the related n otes to the financial statements, which collectively comprise the Fund’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above pres ent fairly, in all material respects, the respective financial position of the governmental activities and the Fund of the City as of June 30, 2021, and the respective changes in financial position for the year t hen ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards ge nerally accepted in the United States of America (GAAS) and the standards applicable to f inancial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter
As discussed in Note 1, the financial statements present only t he Fund and do not purport to, and do not present fairly the financial position of the City as of June 30, 2021, and the changes in its financial position for the year then ended in accordance with accounting principle s generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presenta tion of these financial statements in accordance with accounting principles generally accepted in the United States of America; and for the design, implementation, and maintenance of internal control rel evant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial dou bt about the Fund’s ability to continue as a going concern for twelve months beyond the date of the financial statements.
203 N. Brea Blvd., Suite 203
Brea, CA 92821 Lance, Soll & Lunghard, LLP Phone: 714.672.0022
To the Honorable Mayor and Members of the City Council
City of Orange, California
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with G AAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the over ride of internal control. Misstatements are considered material if, there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS and Government Auditing Standards, we:
x Exercise professional judgment and maintain professional skept icism throughout the audit. x Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
x Obtain an understanding of internal control relevant to the au dit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over the Fund. Accordingly, no such opinion is expressed. x Evaluate the appropriateness of accounting policies used and t he reasonableness of significant accounting estimates made by management, as well as evaluate th e overall presentation of the financial statements.
x Conclude whether, in our judgment, there are conditions or eve nts, considered in the aggregate, that raise substantial doubt about the Fund’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Other Reporting Responsibilities
Required Supplementary Information
Accounting principles generally accepted in the United States o f America require that the budgetary comparison schedule be presented to supplement the basic financ ial statements. Such information is the responsibility of management and, although not a part of the ba sic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplem entary information in accordance with auditing standards generally accepted in the United States of A merica, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financi al statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Management has omitted the management’s discussion and analysis and required pension and other post- employment benefits schedules that accounting principles genera lly accepted in the United States of America require to be presented to supplement the basic financi al statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial re porting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. 2 To the Honorable Mayor and Members of the City Council City of Orange, California
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards , we have also issued our report dated December 13, 2021 on our consideration of the City ’s internal control over the Fu nd’s financial reporting and on our tests of its compliance with certain provisions of l aws, regulations, contracts, and grant agreements and other matters. The purpose of that report is sol ely to describe the scope of our testing of internal control over financial reporting and compliance and th e results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over the Fund’s financial reporting or on compliance. That report is an integral part of an audit p erformed in accordance with Government Auditing Standards in considering the City’s internal control over the Fund’s financial reporting and compliance.
Brea, California
December 13, 2021
3 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
STATEMENT OF NET POSITION
JUNE 30, 2021
Governmental
Activities
Assets:
Cash and investments 109,278$
Receivables:
Accounts 46,502
Accrued interest 113
Total Assets 155,893
Deferred Outflows of Resources:
Proportionate share of pension deferrals 6,356
Proportionate share of OPEB deferrals 2,848
Total Deferred Outflows of Resources 9,204
Liabilities:
Proportionate share of net pension liability 49,692
Proportionate share of total OPEB liability 18,283
Total Liabilities 67,975
Deferred Inflows of Resources:
Proportionate share of OPEB deferrals 129
Total Deferred Inflows of Resources 129
Net Position:
Restricted for air pollution reduction projects 96,993
Total Net Position 96,993$
See accompanying notes to basic financial statements.
4 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2021
Net (Expenses)
Revenues and
Changes in
Net Position
Operating Capital
Charges for Contributions Contributions Governmental
Expenses Services and Grants and Grants Activities
Governmental Activities:
General government 57,706$ - $ 187,394$ - $ 129,688$ Public safety 8,017 - - - (8,017) Total Governmental Activities 65,723$ -$ 187,394$ -$ 121,671 General Revenues:
Investment income (140)
Total General Revenues (140)
Change in Net Position 121,531
Net Position at Beginning of Year (24,538)
Net Position at End of Year 96,993$
Program Revenues
Functions/Programs
See accompanying notes to basic financial statements.
5 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
BALANCE SHEET - GOVERNMENTAL FUND
JUNE 30, 2021
Assets:
Cash and investments 109,278$
Receivables:
Accounts 46,502
Interest 113
Total Assets 155,893$
Fund Balances:
Restricted for air pollution reduction projects 155,893 $ Total Fund Balances 155,893$
See accompanying notes to basic financial statements.
6 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET
TO THE STATEMENT OF NET POSITION
JUNE 30, 2021
Fund Balance of Governmental Fund 155,893$
Deferred outflows of resources 6,356
Net pension liability (49,692)
Deferred outflows of resources 2,848
Deferred inflows of resources (129)
Total OPEB liability (18,283)
Net Position of Governmental Activities 96,993$
Pension-related liabilities applicable to governmental activities arenot due and payable in the current period and accordingly are not reported as fund liabilities. Deferred outflows of resources and deferred inflows of resources related to pensions are only reported in the statement of net position as the changes in these amounts affects only the government-wide statements for governmental activities.
OPEB-related liabilities applicable to governmental activities are notdue and payable in the current period and accordingly are not reported as fund liabilities. Deferred outflows of resources and deferred inflows of resources related to OPEB are only reported in the statement of net position as the changes in these amounts affects only the government-wide statements for governmental activities.
Amounts reported for governmental activities in the statement of net position are different because:
See accompanying notes to basic financial statements.
7 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE - GOVERNMENTAL FUND
FOR THE YEAR ENDED JUNE 30, 2021
Revenues:
Intergovernmental 187,394$
Interest income (140)
Total Revenues 187,254
Expenditures:
Current:
General government 111,112
Public safety 8,017
Capital outlay 95,340
Total Expenditures 214,469
(Deficiency) of Revenues
(Under) Expenditures (27,215)
Fund Balance at Beginning of Year 183,108
Fund Balance at End of Year 155,893$
See accompanying notes to basic financial statements.
8 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF
REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2021
Net Change in Fund Balances - Governmental Fund (27,215)$ 108,937
39,809
Change in Net Position of Governmental Activities 121,531$ Pension obligation reduction reported in the statement of activities does not result in the use of current financial resources and, therefore, is not reported as reduction of expenditures in the governmental fund.
OPEB obligation reduction reportedin the statement of activities does not result in the use of current financial resources and, therefore, is not reported as reductionof expenditures in the governmental fund.
Amounts reported for governmental activities in the statement of activities are different because:
See accompanying notes to basic financial statements.
9 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
Note 1: General
The financial statements are intended to reflect the financial position and changes in the financial position attributable to the Air Pollution Reduction Special Revenue Fund (AQMD) of the City of Orange, California (the City). These financial stat ements are exclusively for AQMD and do not purport to, and do not, present fairly the financial position and changes in the financial position for the City.
Assembly Bill 2766 authorizes the South Coast Air Quality Management District (SCAQMD) to impose an annual vehicle registration fee and to distribute a p ortion of the collected revenues to all local jurisdictions within the South Coast Air Basin. These revenues are to be used solely to reduce air pollution from motor vehicles by implementing new programs and studies necessary for the implementation of the California Clean Air Act.
Note 2: Summary of Signif icant Accounting Policies
a. Description of the Reporting Entity
The accounts of the City are organized on the basis of funds, e ach of which is considered a separate accounting entity with a self-balancing set of accou nts. Monies received under Assembly Bill 2766 are recorded in a Special Revenue Fund, the Air Pollution Reduction Fund, which is used to account for the proceeds of revenue to b e used for the purpose of implementing the California Clean Air Act.
b. Basis of Presentation
The Air Pollution Reduction Fund’s financial statements are pre pared in accordance with accounting principles generally accepted in the United States o f America. The Governmental Accounting Standards Board (GASB) is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the United States of America.
The government-wide financial statements (i.e., the statement o f net position and the statement of activities) report information on all of the nonfi duciary activities of the fund.
The AQMD has no fiduciary activities.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment.
Program revenues include (1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment, and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and oth er items not properly included among program revenues are reported instead as general revenues.
10 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2021
Note 2: Summary of Significant Accounting Policies (Continued)
The underlying accounting system of the City is organized and o perated on the basis of separate funds, each of which is considered to be a separate ac counting entity. The operations of each fund are accounted for with a separate set o f self-balancing accounts that comprise its assets, liabilities, deferred inflows of resources, fund equity, revenues and expenditures or expenses, as app ropriate. Governmental resource s are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.
While separate government-wide and fund financial statements ar e presented, they are interrelated.
c. Measurement Focus, Basis of Accounting and Financial Stateme nt Presentation
The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting . Under the economic resources measurement focus, all (both current and long term) economic resources and obliga tions are included in the accompanying statement of net position. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded wh en a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requiremen ts imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus a n d t h e modified accrual basis of accounting . Under the current financial resources measurement focus, only current assets and liabilities are generally included on the balance sheet. Under the modified accrual basis of accounting, revenues are recognized as soon as they are both measurable and availabl e. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues relating to grants to be available if they are collect ed within 120 days of the end of the current fiscal period and within 60 days for all other revenues. Expenditures generally are recorded when a liability is incurred, as under accrual accounting.
Intergovernmental and interest revenues associated with the cur rent fiscal period are all considered to be susceptible to accrual and have been recognize d as revenues of the current fiscal period. All other revenue items are considered t o be measurable and available only when cash is received by the AQMD.
d. Cash and Investments
Investments are reported in the accompanying financial statemen ts at fair value, which is 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 measurement date . Changes in fair value that occur during a fiscal year are recognized as interest income for that fiscal year. Interest income includes interest earnings, changes in fair value (reali zed/unrealized), gains or losses realized upon the liquidation, maturity or sale of investments and rental income.
Cash and investments are pooled with other City funds for inves tment purposes, with interest being allocated monthly to various funds based on each fund’s prior month -end cash and investment balance.
11 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2021
Note 2: Summary of Significant Accounting Policies (Continued)
e. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and will not be recognized as an outflow of resources (e xpense/expenditure) until that time. The AQMD has items related to the pension and OPEB p lans that qualify for reporting in this category.
In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financ ial statement element, deferred inflows of resources, r epresents an acquisition of net position that applies to a future period and will not be recognized as an inflow of resources (revenue) until that time.
The AQMD has items related to the pension and OPEB plans that q ualify for reporting in this category.
f. Net Position Flow Assumption
Sometimes the AQMD will fund outlays for a particular purpose f rom both restricted (e.g., restricted bond or grant proceeds) and unrestricted reso urces. In order to calculate the amounts to report as restric ted net position and unrestrict ed net position in the government-wide financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the AQMD’s policy to consider restricted net position to have been depleted before unrestricted net position is applied.
g. Fund Balance Flow Assumptions
Sometimes the AQMD will fund outlays for a particular purpose f rom both restricted and unrestricted resources (the total of committed, assigned and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned and unassigned fund balance in the governmental fund financial statements, a f low assumption must be made about the order in which the resources are considered to be applied. It is the AQMD’s policy to consider restricted fun d balance to have been deplete d before using any of the components of unrestricted fund balance. Further, when the comp onents of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last.
h. Fund Equity
In the fund financial statements, government funds report the f ollowing fund balance classification:
Nonspendable includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be m aintained intact. The Air Pollution Reduction Fund did not have a nonspendable fund b alance as of June 30, 2021.
12 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2021
Note 2: Summary of Significant Accounting Policies (Continued)
Restricted includes amounts that are constrained on the use of resources by either (a) external creditors, grantors, contributors or laws of regulations of other governments or (b) by law through constitutional provisions or enabling legislation.
Committed includes amounts that can only be used for specific p urposes pursuant to constraints imposed by formal action of the government’s highes t authority, the City Council. The formal action that is required to be taken to establish, modify or rescind a fund balance commitment is a resolution. The AQMD did not hav e any committed fund balance as of June 30, 2021.
Assigned includes amounts that are constrained by the government’s intent to be used for specific purposes but are neither restricted nor committed. The AQMD did not have any assigned fund balance as of June 30, 2021.
Unassigned includes the residual amounts that have not been res tricted, committed or assigned to specific purposes. The AQMD did not have any unassi gned fund balance as of June 30, 2021.
i. Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets, deferred outflows of resources, liabilities and deferred inflows of resources at the reporting date. Accordingly, actual results could differ from those estimates.
Note 3: Cash and Investments
a. Equity in the Cash and Investment Pool of the City of Orange
The AQMD has no separate bank accounts or investments other than its equity in the cash and investment pool managed by the City. The AQMD is a voluntar y participant in that pool. This pool is governed by and under the regulatory oversight of the Investment Policy adopted by the City Council of the City. The AQMD has not adopt ed an investment policy separate from that of the City. The fair value of the AQMD’s in vestment in this pool is reported in the accompanying financial statements at amounts ba sed upon t he AQMD’s pro rata share of the fair value calculated by the City for the entire City portfolio. The balance available for withdrawal is based on the accounting rec ords maintained by the City, which are recorded at the estimated fair value.
b. Disclosures Relating to the Investment Policy, Interest Rate Risk, Credit Risk and Custodial Credit Risk.
Additional disclosures related to the investment policy, intere st rate risk, credit risk and custodial credit risk are available in the City of Orange’s Annual Comprehensive Financial Report.
13 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2021
Note 3: Cash and Investments (Continued)
c. Fair Value Measurements
The AQMD categorizes its fair value measurement within the fair v a l u e h i e r a r c h y established by accounting principles generally accepted in the United States of America.
The hierarchy is based on the relative inputs used to measure t he fair value of the investments. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The AQMD’s investment in the City investment pool is not subjec t to the fair value hierarchy.
Note 4: Retirement Plan
a. Plan Description, Benefits Provided and Employees Covered
The City contributes to the California Public Employees’ Retire ment System (CalPERS), an agent multiple-employer public employee defined benefit pens ion plan (the Plan).
CalPERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and their beneficiaries. CalPERS a c t s a s a c o m m o n investment and administrative agent for participating public en tities within the State of California. Benefit provision and all other requirements are established by state statute and memoranda of understanding with employee bargaining units. A fu ll description of the pension plan regarding the number of employees covered, benefit provisions, assumptions (for funding, but no accounting purposes) and membership inform ation is listed in the CalPERS June 30, 2019. Valuation Report. Details on the benefit s provided can be obtained in Appendix B of the Actuarial Valuation Report. This report and CalPERS’s audited financial statements are publicly available reports tha t can be obtained at the CalPERS’s website under Employers. Also, for accounting purpose s , t h e G A S B 6 8 Accounting Valuation Report is available for the City of Orange Miscellaneous Plan as of the measurement date June 30, 2020. This report is available from the City.
The plan provides benefits for two membership classifications, Miscellaneous and Safety, and those benefits are tiered based upon the date of CalPERS me mbership. Safety membership is extended to those in active law enforcement and fire suppression, while all others are classified as Miscellaneous members. Assembly Bill ( AB) 340, also known as the Public Employees’ Pension Reform Act (PEPRA), created new b enefit formulas and a final compensation period, as well as new contribution requirem ents for new employees.
For the purpose of PEPRA, “new employees” are those hired on or after January 1, 2013 and had never been a member of CalPERS previously. CalPERS refe rs to members prior to January 1, 2013 as classic members.
City employees involved with the AQMD program are covered under t h e C i t y ’ s Miscellaneous Plan. As such, related pension balances and activities have been allocated proportionately to the AQMD in relation to salaries paid. Addit ional details related to the pension plans deferred outflows , deferred inflows, net pension liability, and required supplementary information can be found in the City’s Annual Comprehensive Financial Report for the year ended June 30, 2021.
14 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2021
Note 5: Other Post Employment Benefits (OPEB)
a. Plan Description, Benefits Provided
The City administers an agent multiple-employer defined benefit post-employment healthcare plan for eligible City retirees and their dependents through California Public Employees’ Retirement System (CalPERS). Retirees from the City enrolled in the Public Employees Medical and Hospital Insurance Program (PEMHCA), is a n agent multiple-employer postemployment benefits plan through CalPERS, are eligible for these benefits.
These health insurance benefits are authorized through City resolution/memoranda’ s of understanding defining health ca re benefits and contribution le v e l s a n d t h r o u g h t h e contractual agreement between the City and CalPERS. The City c urrently contributes $139 per month for each retiree and the retiree is responsible for the balance of the premium amount.
City employees involved with the AQMD program are covered under the City’s OPEB plan as such, related OPEB balances and activities have been allocat ed proportionately to the AQMD in relation to salaries paid. Additional details related t o the OPEB plans deferred outflows, deferred inflows, total OPEB liability, and required supplementary information can be found in the City’s Annual Financial Comprehensive Report for the year ended June 30, 2021.
Note 6: Availability of other Information
Copies of separate progress reports filed with the SCAQMD Board of Directors, which detail the accomplishments during the fiscal year ended June 30, 2021, are available at the Orange City Hall.
Note 7: Subsequent Events
In preparing these financial stat ements, the City has evaluated events and transactions for potential recognition or disclosure through December 13, 2021, the date the financial statements were available to be issued.
15 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
BUDGETARY COMPARISON SCHEDULE
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Budget Amounts Actual Positive
Original Final Amounts (Negative)
Budgetary Fund Balance, July 1 183,108$ 183,108 $ 183,108 $ -$ Resources (Inflows):
Intergovernmental 185,150 185,150 187,394 2,244 Investment income 915 915 (140) (1,055) Amounts Available for Appropriation 369,173 369,173 370,362 1,189 Charges to Appropriation (Outflow):
Salaries and benefits 51,076 51,076 57,128 (6,052) Capital projects 100,000 102,242 95,340 6,902 Trip reduction program 54,079 54,079 45,762 8,317 Professional costs 7,600 7,600 2,124 5,476 Printing costs 2,700 2,700 - 2,700 Bike team usage 10,000 10,000 8,017 1,983 Association dues 700 700 - 700 Training costs 900 900 - 900 Administrative and general overhead 6,098 6,098 6,098 - Total Charges to Appropriations 233,153 235,395 214,469 20,926 Budgetary Fund Balance, June 30 136,020$ 133,778$ 155,893$ 22,115$ See accompanying note to required supplementary information. 16 CITY OF ORANGE
AIR POLLUTION REDUCTION FUND
NOTE TO REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2021
Note 1: Budgetary Accounting
The budget for the Air Pollution Reduction Special Revenue Fund is formally adopted annually and is prepared in accordance with accounting principles generally accepted in the United States of America. The budget is monitored to ensure compliance with legal provisions embodied in the appropriated budget as approved or amended by the City Council throughout the year. Department heads are responsible for monitoring their depa rtment’s appropriated budget. The legal level of budgetary control is at the fund lev el. The City’s management may transfer resources between operating line items within a depart ment in the same fund as they see appropriate. Encumbrances (e.g., purchase orders, contracts) outstanding at year-end are reported as restriction of fund balance since they do not constitute expenditures or liabilities.
17 INDEPENDENT AUDITORS’ 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
To the Honorable Mayor and Members of the City Council
City of Orange, California
We have audited, in accordance with the 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, the financial statements of the governmental activities and the Air Pollution Reduction Fund (the “Fund”), a special re venue fund of the City of Orange, California (the “City”), as of and for the year ended June 30, 2021, and the related n otes to the financial statements, which collectively comprise the Fund’s basic financial statements, and have issued our report thereon dated December 13, 2021.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statement s, we considered the City’s internal control over the Fund’s 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 effecti veness of the City’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 their 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 reasonable possibility t hat a material misstatement of the entity’s financial statements will not be prevented or detected and corre cted on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpo se described in the first paragraph of this section and was not designed to identify all deficiencies in in ternal control that might be material weaknesses or, significant deficiencies. Given these limitation s, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Fund’s financial statements are free from material misstatement, we performed tests of its compliance wit h applicable provisions of Assembly Bill 2766, Chapter 1705 (Health and Safety Code Sections 44220 through 44247) and certain provisions of laws, regulations, contracts, an d grant agreements, noncomplian ce with which could have a direct and material effect on the Fund’s financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed n o instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
203 N. Brea Blvd., Suite 203
Brea, CA 92821 Lance, Soll & Lunghard, LLP Phone: 714.672.0022
To the Honorable Mayor and Members of the City Council
City of Orange, California
Purpose of this Report
The purpose of this report is solely to describe the scope of o ur testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Cit y’s internal control or on compliance. This report is an integral p art of an audit performed in accordance with Government Auditing Standards in considering the City ’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Brea, California
December 13, 2021
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